Evening star., 1938-06-26
Bottom of Depression
Expected Soon
BY OVEN L. SCOTT.


being sounded by the Governments
leading forecasters of the business out
look after q year and more of gloom.
These experts, whose predictions now
are influencing Mr.. Roosevelt to what
they would describe as too hasty
optimism" have consistently been right
in calling the business turns during
recent years.
Almost without exception the Govern
ment forecasters predict that the bot
tom Of this depression will be reached
within the next month or two. That
bottom, all seem agreed, will be con-
siderably above the one established by
the 1929-l933 depression and will be
only slightly below that established this
month.
For purposes OF measuring business
activity. the accepted scale Is that Of
the index Of industrial production, as
determined by the Federal Reserve
Board. This index stood at 1T In Au-
gust, 1887, when the present depression
set In. A precipitate fall-breaking all
past records-carried the index down to
80 In January. Since that time the fall
has been steady but gradual, reaching
rs In May and possibly 73 in June. The
betting is that it will not break TO in
July and that some improvement then
can be expected. At the bottom of the
previous depression this index fell as
low as 58
Most interest now centers on what is
likely to happen from here on out.
There is agreement among the men who
do the Governments predicting that
recovery will be slow through the fall
and winter of 1898. These men think
that, as best guess, next January may
see q rate of industrial activity slightly
higher than the rate Of last January,
when 1t stood at 80 per cent Of the 1928
1925 average.
This means little prospect of anything
resembling prosperity at election time
in November.
But by spring something like a real
push toward recovery is looked for. This
push, according to the forecasts that
are going to the White House, should
carry the index to 100 or somewhat
higher by the start of 1910. Even that
rate would be far cry from the rate
Of around 140 that would represent full
employment and production. It would
involve recovery as rapid as that oc-
curing between the middle of 1894 and
the end of 1885,
Reasons for this analysis of the recov-
cry outlook are many and are largely
agreed upon by the principal Govern
ment economists.
First of all, there is the fact that for
more than eight months the people of
this country have been using up goods
faster than they have been producing
new goods to take their place. This
means that there really are shortages
developing that will need to be filled
The filling Of these shortages will mean
orders. and orders are the lifeblood of
business, requiring Unemployment as
well as the prospect for profits.
Then, along with that situation, there
Is the further very significant fact that
people have continued to build houses
at a rate much higher than might be
expected in view of the way jobs have
been lost and incomes have been cut.
Home building, until now at least, has
definitely resisted the trend of general
business, revealing a demand that could
produce recovery If given a chance to
translate itself into action.
+ **
But most importance is attached to
the shot in the arm that the Govern
ment again is to give to business.
The dollars that are represented by
the checks going to w. P. A. workers
are just as good dollars as those received
by any other workers. So are the dollars
that go to farmers in the form of sub
sides and those that are paid to con-
tractors on P. w. A. jobs and to business
enterprises that produce and sell mate
rials of all kinds. The total of all of
these dollars paid out by the Govern
ment is going to rise very materially in
the months ahead.
That total will be augmented by other
dollars going in larger volume to indi-
viduals entitled to draw unemployment
insurance benefits.
All of these payments will roll up
through the fall, reaching a rather high
level in the spring of next year, to COIN
eide with what normally is a tendency
of business to improve In March and
April. The result can be a very definite
push toward recovery next year, after
more slow months this year.
When the longer range view is taken,
the outlook is more obscure in detail,
but increasingly clear in general outline.
4 4 \
President Roosevelt and Congress both
show q continued unwillingness to in
crease taxes sufficiently to provide the
dollars needed to pay subsidies. At the
same time the appetite for Government
checks Is q cultivated appetite that is
dificult to overcome, once acquired.
This combination makes it look more
and more as though the Government
would be forced from one expedient to
another in the period ahead to obtain
dollars. Congress always has had u
powerful bloc interested in soft money.
That bloc Is gaining strength.
When these facts are coupled with
others equally important the direction
that Government policy is likely to be
forced to take becomes obYious.
The Governments credit now guaran-
tees $21, ,0O0, 900 900 in bank deposits.
That credit has been used to underwrite
IS ,000, ,000 900 worth of farm and city
mortgages based upon property values
that are a bit high. A larger and larger
volume Of farm production is being un-
derwritten on an artificial price basis
with Government loans. Government
now is moving into the field of placing
a bottom under wages Of workers in in
dustry and a top on hours Of work.
~ y
All Of these facts, and others as we'll,
add up to the conclusion that Govern
ment-unless willing to face q terrific
strain on its credit-cannot permit de-
flation of wages and prices and values
l. o.