Evening star., 1937-01-03
1897 PRICE STABILITY
is SEEN NEED in i. S.
Observer Believes Sensational Rise Dur.
ing This Year Would Be q
Calamity.


rose to q seven-year high in Chicago
and an eight-year high in Liverpool.
Burley tobacco in Kentucky struck q
20-year high. In London rubber rose
above the price of the boom year,
1929. Copper was at the highest since
1880.
The rise in prices that has taken
place so far, during the past year, or
during the whole period since the de-
preston low in 1892, has been great.
But 1t has been wholesome because
it has been a rebound toward normal
from an artificial and unwholesome
low. It was on October 20, 1888, that
President Roosevelt said that prices
were too low, that 'it is definitely
part Of our policy" to raise prices-"if
we cannot do this one way we will do
1t another; do it we will
Present Level Wholesome.
When MIR. Roosevelt announced that
determination it was a wholesome
policy. The fact that prices have risen,
partly through Mr.. Roosevelt's policies
and partly through natural forces, Is
likewise wholesome. The present level
of prices Is wholesome. The level Is
still somewhat below normal, and the
present level Of most prices Of most
commodities and most securities Is
justified by the state of business activ-
ity and other conditions. A still fur
ther rise in the price level, If it does
not 60 too far, would be wholesome.
But a sensational rise--a rise, for
example, which would repeat during
the next two or three years the per-
centage Of rise that has already taken
place from the depression low-such
rise piled on top of the existing rise
could hardly be anything but q re-
suit of dangerous imitation. The infla-
tion might have any one. or several, or
a number of causes; it might be
result OF war in Europe, or it might be
a result Of the administration fiscal
and other policies, or it might be a
result Of popular psychology; no mat
ter how or why it comes 1t would be,
if extreme, calamity.
Whether or not America will ex-
perience any serious imitation of
prices will depend upon certain facts
and forces. Whether some of these
facts and forces exist, whether others
will appear. whether, in short. inf1a-
tion will come, Is matter in the field
of judgment, particularly the judg-
ment Of economists and others well
informed in this area. At present they
are by no means unanimous. Prob
ably a majority of them think the
danger is sufficiently serious to cause
them at least to be watchful. Some
who are business men and financiers
have taken steps to guard themselves
against the risk. There are many,
however, who scout the idea of in
flation.
A principal cause of imitation, if it
comes, will be increase in the public
debt. For reasons too intricate to go
into here, every addition to the num-
Der of dollars owed by the Govern
ment takes tiny fraction off the
purchasing power of every existing
dollar in the banks or in the pockets
of the people, and thereby causes
prices to edge upward. The heart of
the question then is. will the public
debt continue to increase?
Quantity of Spending.
The answer lies in the quantity of
Government expenditures. For meet
ing these expenditures and ultimately
overcoming the Government deficit,
the administration has two ways. One
Is taxation, the other is borrowing
and creating new money. Mr.. Roose-
welt just now seems to rely on strong
hope that the quantity of money re-
ceived from taxation will so greatly
increase as ultimately to overcome
the deficit. 1t Is a fact that the
quantity Of money received from taxes
is Increasing rapidly, because busi-
ness activity is increasing rapidly.
But there is school of thought, less
optimistic than Mr.. Roosevelt, which
insists that receipts from taxation
alone will not be enough, and that
the deficits cannot be completely over
come without a serious reduction in
Government expenses.
So the question, in still another
form, is: Will the administration, or
Congress, or both, take steps to re-
duce the Governments spending? The
administration entertains some such
intention, but apparently only in a
mild way. We observed toward the
end of the year publicity emanating
from the administration to the ef-
feet that while there will be a re-
organization of Government depart
ments this reorganization will not Sc
riously reduce the quantity of expendi-
ture. It looked as If the administra-
tion was preparing the public to be-
come Injured to high expenditures.
The other source from which re-
duction Of expenditures could come
is Congress. But Congress Is not likely
to reduce expenditures unless leader
ship in that direction Is taken by the
President. Individual Congressman,
as rule. when they look forward to
reelection, anticipate they will be
judged by their constituents, in most
cases, not by the reduction of Govern
ment outlay, but rather by the guam
tity of Government money they bring
home to their districts. An individual
Congressman, consulting self-interest.
is apt to conclude that his chances of
reelection are improved If he can
point out that through him and the
administration large quantities Of
Government money were brought into
the district in the form of relief prof.
ects and the like.
Copyright, 1887,