Henderson daily dispatch., 1937-05-21
Industrial States Buzz
AS Business Speeds Up

Continued from Page One.)
many of the businessmen and inves-
| tors with whom 1 have talked this
past week is the fear of a change in
the price of gold. 1t is felt that the
United States cannot indefinitely con-
tinue to pay $35 an ounce for the
| metal. There is a feeling that we will
| soon have to refuse to take all foreign
gold offered us at this price. Rumors
are that the price will be cut to $25
an ounce. Many fear that this would
start bear market in commodity and
stock prices. They feel that if the
price of gold is slashed, the entire
| commodity price level must be re-
vamped. They believe this would mean
serious readjustments and might
mark the beginning of a major down.
ward business cycle.
I have never had much patience
with those who are always worrying
about the price of gold. It's effect on
the business cycle is being magnified
all out of proportion. Of those who
fear a cut in the price of gold, I ask
the question: what happened when
gold was increased in price in the sec
ond half of 1888? Did copper, cotton.
rubber, or other commodities imme-
diately jump a proportionate amount
| in price," It is true that most of these
materials have trehbled or quadrupled
in the last three years But that is due
mostly to an increase in the natural
demand for them rather than to their
revaluation in terms of the new price
of gold.
Doubts Basic Effect.
According to strict theorists, if gold
should drop to $25 an ounce, corn!
should tumble from $14O to $1OO per
bushel. However, what effect does the
price Of gold have on the price of corn
when grain elevators in Chicago are
empty and delivery contracts must be
met? What difference does it make if
gold is dug from one hole in the J
ground only to be reburied in anoth- |
er (Fort Knox, Kentucky? 1t is pref |!
ty difficult for the average man to |
see how this affects the price of fry !
ing pans, rain-coats, or apple pies. !
believe that other factors, such as
supply and demand, are far more vital /
For example, when output of copper !:
is deliberately being curtailed and de- |
mand is increasing On all sides, the {
logical result should be a mark-up in I
copper quotations regardless of the !,
price of gold. |.
But economists who do not agree
ask: What boosts the demand for |
"copper" My answer is: Because bus
mess is better" And what makes bus |
mess better? Here is where the real |
difference of opinion comes. The big
question is: What Srings the turning |
point in a period of depression or !
prosperity? Certainly nothing so sim
pie as a change in the price of gold. |
l have devoted my life to the study |
of the business cycle in all it's phases !
My answer to that question is: The
turning point in any business cycle |
comes when and because the forces J
of depression or expansion have final
ly spent themselves. The ancient law
of action and reaction rules the bust |
ness cycle. Raj ing or lowering the [
price of gold has about as much effect |
on the basic trend of industrial pro-
duction as King Canute did on the
tide.
Effect Is PSI Geological.
If our money system consisted
solely of gold coins, then the supply
and price of gold would affect the
volume of business. Inasmuch, how
ever, as our present money" consists
almost entirely of "credit" dollars,
gold should mean little today. Gov
eminent policies, such as ornaments,
budgetary deficits, relief spending,
production and monetary control, are
vital factors today. AS a matter of
practical economics, they are far
more important than the gold situa-
ton. Over ten-tO-twenty year period
the price of gold may still have some
slight influence on commodity prices
and business. But right now it's big
gest influence is psychological-and
only important because it's true in
fluence is vastly over-estimated.
This gold case is typical of the fact
that businessmen and investors are
always jumping to conclusions. Their
conclusions are often based on super
fetal factors. Fundamental statistics
are frequently overlooked. This week,
as l Travelled through one busting
town after another in this great in
dustrial area, found it hard to re-
concile the general feeling of uncer
tainty. For instance, factory payrolls
have increased $15OOO,00O weekly in
the last several months alone. Build
ing is 80 per cent above a year ago |
in these eastern states CottOn-textile
activity is close to all-time highs. Shoe
put is in a similar position. Com /
mercial loans are expanding weekly