Evening star., 1939-01-01
World Staple Prices
May Continue 10
Decline in 1899
War Scores, Recovery
Bring Only Brief
Rallies in 1888
BY Cambridge Associates

The downward trend Of commod-
lty price averages which began in
early spring of 1887 continued into
the late spring of 1888. At that
time, partly under the influence of
budding recovery, partly because of
recurring alarms in Europe, there
was brief rally. In recent months.
in spite of further extensions of
American recovery and the new in.
tensity of the foreign arms race,
most prices have drifted within
narrow range only slightly above
their 1888 lows
The world commodity price trend
appears downward. This was the
almost unbroken course from 1920
TO 1893. In the latter year, largely
under the influence of the inflation-
ary policies of the American Gov
ernment and its announced inten-
ton to restore prices to the 1925
level, there was reversal of the
postwar course
Under the same inflationary in
fiuences, prices continued up until
the spring of 1887. At that time
both the American and British gov
ernments, alarmed by the specula-
tive increases in certain commodi-
ties, placed their influence against
continuation of the movement. This
action was the signal for another
change in trend, this time down.
ward.
No Basis for Rise.
Governmental action, however,
would not have proved so effective
If there had been real reason for
the rising tendency of prices be-
tween 1888 and 1887. In reality
there had been no genuine basis for
it. While drought and the Federal
crop reduction efforts had resulted
in some distribution of the unWieldy
surpluses of the 193O-34 period. at
no time had there been actual fear
of shortage. This was also true in
the case of manufactured and min
eral products. European arms race
and some measure of recovery
brought some increased demand.
But never had there been any ex-
tensive shortage or expected short
age of supply.
Much of this price movement be-
tween 1888 and 1897 had its origin
in the false premise that prices
would be higher, that they would
continue to rise because measures
taken by the United States Gov
ernment were of the kind that had
always been considered inflationarv.
The premise was false because
the United States Government was
not taking such action alone, it was
not taking it first, it was taking it
after other governments had taken
similar action. The measures adopt
ed by the United States Government
simply brought this countrys price
levels into something like their for
mer relationships to the price levels
of other important producing coun-
/ tries.
New Price Theory.
At the present time the pound
sterling is dropping in comparison
to the dollar. Englands import
needs being what they are, the
pound will probably continue to drop
until the United Kingdom can buy
goods at greater advantage in world
markets. World commodity prices,
measured in our currency. will re-
| fleet the lessened value of the
pound and no action taken by our
Government can create more than
a brief furry in the prices regis
tered in world markets.
The fact seems TO be. however.
that the price boosting philosophy
of few years ago has been dis
carded, A better relationship be-
tween price groups may still be
desired and worked for. but the new
goal is to increase incomes and
maintain low prices so that cash
incomes of consumers can be trans
lated into greater buying power.