Evening star., 1938-02-18
Prices
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there was ground for concern that a
too rapid rise in the prices of some
commodities was encouraging a specu-
lative boom. During the past six
months, on the other hand. the gen.
eral price level and industrial activity
have been declining. Government
policy must be directed to reversing
this defationary trend
This does not mean that all prices
should advance. nor that the rise
should be rapid Prices of different
groups of products must be brought
into balanced relations to one another.
! Some prices and some costs are still
too high to promote that balanced re-
lationship between prices that is nee
essary for sustained recovery. Cob
tinued high prices of many of the
commodities not subject to highly
competitive market forces intensifies
the downward pressure on all other
prices. Those industries that have
maintained prices and curtailed output
should seek the restoration of profits
through increased rather than through
restricted output.
The prices of some items are still
at the highest levels reached in 1887;
some are even higher than in 1929.
When high prices sharply curtail sales
there is real danger This is shown by
our recent experience with housing.
A year ago there was serious short
| age. We had unused productive re-
sources ample to overcome the short
age. Yet all the major elements in
housing costs advanced so sharply by
the spring of 1887 as to kill a promis-
ing expansion of activity in an indus
try whose restoration is vital to con-
tinued recovery.
For industries, such as agriculture,
that operate at high level of capac-
ity even when business activity is at
low levels, the restoration of profits
must come primarily through higher
prices. Higher prices in such indus
tries and increased output in other in
dustries will by increasing profits, en-
/ courage new investment in replace
ment and expansion of equipment
This is necessary to full recovery.
Balanced Price Structure.
The average family will benefit
from the business recovery which a
balanced price structure will foster.
Increased employment and more con-
tinuous income should much more
than offset any increase in the cost
OF living. Recently wholesale prices
nave declined markedly, yet that
decline has been reflected in the cost
OF living only to very slight degree.
"A moderate rise in wholesale prices
at this time should only slightly affect
living costs. Incomes of most fam
lies will increase, while the cost of
what the housewife buys should show
little change. The average family
Will enjoy higher standard of living.
1T Is clear that in the present sit
uatlon moderate rise in the general
price level is desirable. and that this
rise need not, and should not, extend
to all prices. The rise should take
place In, and must be mainly confined
to, classes of commodities whose prices
are too low. These include most of
those raw materials and finished prod
ucts which are produced and sold
under highly competitive conditions.
Such rise must not be so sharp or
continue so long as to lead to a repe-
tltlon of the unhealthy speculative
conditions OF year ago. That sharp
rise in prices encouraged speculative
inventory buying: which, combined
with the decline in housing construc-
ton, laid much of the ground for
the present recession. We must do
everything we can to prevent this
from happening again.
Our program seeks balanced sys-
tenn of prices such as will promote
a balanced expansion in production.
Our goal is constantly increasing
national income through increasing
production and employment. This is
the way to increase the real income
of consumers
This is not poiicss of restriction;
1t is policy Of abundance.
Our agricultural, Industrial hous-
ing and monetary programs have been
and will be directed toward this end" !"
The President declared price dis