Evening star., 1936-05-20
BY GEORGE T. HUGHES.


NEW YORK, May 20 (N.AN.A).-|
It is the probability of the coincidence
of advancing commodity prices with
an upward trend of the building cycle
that is the basis for the expectation
OF Prof. Frank A. Pearson that the
next five to eight years will witness
greatly increased business activity.
The Cornell economists studies show
comparatively regular fluctuations in
building. The building cycle, how
ever, progresses independently of COM
modify prices. Here is the way the
Cornell professor puts it:
These definite cycles of over and
under building are largely independent
of the value of gold From about
1880 to 1890 the building cycle was
rising and commodity prices fell.
From 1898 to 1905 the building cycle
was rising and commodity prices were
rising. From 1921 to 1925 the build
ing cycle was rising and commodity
prices were comparatively stable at a
high level.
Expansion Feeds on Itself.
"Since buildings are stored-up COM
modities, their value varies with the
level and trend of commodity prices.
A rising building cycle and advancing
commodity prices cause property values
to rise rapidly and stimulate further
expansion This was the case from
1898 to 1905 and from 1921 to 1926.
which we're very profitable periods in
American cities.
"A period of declining building cycle
and falling commodity prices occurred
In the nineties and from 1929 to 1884.
During these periods property values
fell and bankruptcies were widespread.
The two most important factors
affecting the political, economic and
social welfare of the individual and of
the country as whole are Cd the
level and direction of the movement Of
commodity prices and CD the level and
direction Of movement of the building
industry. The fortunes of the indi-
vidual are very uncertain and largely
beyond his control because of these
two unknownS.
Disturbances Are Traced.
1.-The total number of persons in
eolved and the total production of the
automobile. of the textile and of the
food industries are very great, but the
amount of f1uctuation in business due
to their variation is comparatively
small. Since the building industry
employs a large percentage of people
and is subject to violent cyclical fluctu-
alton over considerable periods Of time.
the major disturbances in business
arise from its variation. This domi-
nant force moves through time largely
independent of the level and direction
Of the movement Of commodity prices.
From 1920 to 1929, the world price
level was too high for the gold sup
ply. This aggravated the expansion
and overbuilding of the twenties. The
collapse in commodity prices, which
carried commodity prices far below
the level justified by the worlds gold
supply, aggravated the depression
from 1929 to 1888"
It is then the direction of COM
modify prices from here out that is
the crux of the matter. This writer
Is not prepared to take definite posi-
tion on that subject yet. 1t is the
theory of Prof Pearson and his COL
league DR.. George F. Warren. that the
FIVE factors affecting the price of any
ommodity-buildings for instance
are the supply and demand for build
tngs, the supply and demand for gold
and the price Of gold.
Gold Supply to Increase.
The price of gold can be eliminated
for the purpose of this discussion. In
the United States it is $35 an ounce
and it is not likely to be changed.
True. there is authority in the law
for an advance in the price, but, again
In this writer's opinion, it will not be
exercised. If the present administra-
ton is returned, all the indications
point to the gold value of the dollar
being undisturbed. If the present ad-
ministration is not returned there GER
tainly will be no further devaluation
Of the dollar.
AS to the supply or gold, the produc-
ton statistics speak eloquently. Gold
output has been stimulated enormously
by the rise in the United States price
and by currency depreciation in other
parts Of the world. The demand up to
now for boarding has been stimulated
also. Should dehoarding movement
Set in, this demand would slump. This
point was made in the monthly letter
Of the National City Bank the other
day. Apparently it was what DIR. L.
j. r. Trip, president of the Bank for
international Settlements, had in
mind when, in its annual report, he
pointed out that within a short time
- :.