Evening star., 1937-03-21
UNITY HELD VITAL
FOR CONTROL OVER
INITIATION TREND
Wage and Price Pyramiding
and Rising Inventories
Arouse Fears.
CLIMB CURBS DEMAND
FOR DURABLE GOODS
Forward Contracts Placed With
Less Freedom Because of
Market Uncertainties.
BY CHARLES F. SPEARE.

NEW YORK, March 20.-In the
last 30 years there have been five crit
ical financial and commercial situa-
tlons in the United States They have
all come at about seven-year intervals
In 1907 there was the sudden and vio-
lent banking panic. In 1914 the war
brought on stock market convul-
sion. In the years following the end
OF the war there was great imitation
and ruinous defiation, principally in
commodities. In 1929 another Wall
Street crash occurred; then seven lean
years. Now another crisis is threat
ened-ln the midst of prosperity-if
We are to believe the alarming state
mentS that have been coming from
Washington this week
1t is Of interest to note that high
money accompanied the earlier dis
turbances. Today we have in this
country and mostly throughout the
world excessively low interest rates.
For three years the discount rate of
the Federal Reserve Bank of New
York has been pegged at z per cent.
All OF the others, except Cleveland,
also at p per cent, are fixed at per
cent. Never before has capital in the
United States been so cheap for so
long time, or over such a wide area.
as since 1884. An accompaniment Of
this was the lowest average yield, until
a few weeks ago, for United States
Treasury paper, for municipal bonds
and for corporation obligations known
to this country.
Crisis Arises Suddenly.
The present crisis, so-called, has
emerged suddenly out of a situation
that seemingly contained all of the
elements of sound business recovery
and expanding employment and cor
poration profits. Those who have
steadily criticized the credit policy Of
the administration have been talking
imitation for nearly four years, but
without positive signs, either in COM
modlties or in securities, that infla-
ton had arrived.
The members of the Federal Reserve
Board with whom this writer con-
versed early in January had no con-
Germ then over monetary imitation, but
they were beginning to be apprehen-
sive Of the effect of wage and price
advances on commodities and on stock
speculation. The armament race in
Europe had not started The strike
in Flint had not begun. Corporations
were still selling 3l4 per cent re-
funding bonds at ! to 2 points pre-
MUM over par.
Commodities have had their sharp
est advance since European buying
Tor war preparations commenced
Within this same 60-day period has
transpired the most notable adjust
ment of wages in industrial history
and widespread epidemic of strikes
to compel higher level of compen-
sation as we'll as recognition of or
ganized labor. The forces of imitation
have, consequently, been awakened by
these new conditions, and, at the same
time, they have quickened those that
were latent in the old.
The saving grace in the present sit
uation is that Washington is deeply
disturbed by it and proposes to act
to prevent it's spread. The authority
and the stamina of the personnel OF
the Federal Reserve Board is greater
today than in 1920-21. 1t has a more
cooperative relationship with the
Chief Executive and the Secretary OF
the Treasury than in 1929.
United Control Needed.
All of the controlling elements in
the banking, industrial and labor
worlds must unite in this effort. There
must be respect for the law and a
cessation of sit-doWn strikes. Cor
porations must stop showing up prices
100 to 200 per cent over the cost of
production caused by higher wages.
Labor must be made to realize that.
In gaining ground for one trade, it
cuts 1t out from under the workers in
another trade, whose living costs
thereby are inflated.
There is no sign of sane philosophy
and no thought of the future in the
pyramiding of wages and prices now
taking place. Both employers and
employees appear equally unconscious
OF the trouble they are promoting.
There are intimations that the
sWiftness and the scope of the price
rise is checking demand for durable
goods; also that inventories of mer-
chandise are increasing at more
rapid rate than since the recovery in
business began.
Forward contracts are not being
placed with so much freedom on
account of the uncertainties of prices.
In wheat, the current bullish visible
supply situation may be reversed by
the 1887 harvests, for which there
are excellent prospects. The rigid
control Of some of the metals and of
rubber might easily be eased in order
to moderate the price imitation con-
ditions.
There are sage students of foreign
politics who believe that, before Sum-
mer, the mad race for armaments
may slacken its pace, in which event
there would be an immediate decline
in demand for the raw materials and
the finished products now being sup
piled by the United States to Great
Britain, France, Italy and Japan.
In other words, there are potential
correctives in the situation that may
be more effective in restoring eouilib-
rum than any mandates proposed
by Washington for meeting the present
emergency.
There will doubtless be concern
among interior banks over their large
holdings in Government bonds and
notes and there will be those who, as
in the past, will argue that Treasury
obligations are likely to sell much
lower.
tcopyrieht, 1887, by the North American
Newspaper Alliance. IncJ