Evening star., 1945-01-14
Longer War Forcing
Prices Skywurd
Writer Sees Serious Danger oi
Unchecked Initiation
BIZ Open L. Scott.

By O11en L. Scott.
A longer than expected war is adding !
greatly to the prospect that an imitation
Of the price level will occur in the post
war era. How great that imitation is to
be will depend upon the behavior Of the
public, armed with an unprecedented
supply OF money and upon the readi-
ness Of Congress to continue wartime
controls into the peace period. a
There have been SO many warnings
Of the danger of price imitation, when
that imitation did not occur. that peo-
pie now are hardened and uninterested.
Yet the forces that can compel price
levels sharply higher are growing at an
increased rate and the signs that these
forces are breaking through existing
controls keep on multiplying.
TelItale factors are found first Of all 2
in the money supply and volume Of saw
ings.
The supply of money in checking ac-
counts, In currency and in Government
deposits now is above $1o0 ,0o0, ,o00, 900 and
rising. That is $50, ,000, 900 600 above the
1910 level. Currency alone totals more
than $4,000 900, 900, or more than three
times the prewar amount. This increase
In currency reflects in part the very
great growth in the black market and
an increase in illegal transactions of all
kinds ae
Liquid savings of individuals accumu-
lated since 1889 now are above S125,.
00o,000o0o and are rising at rate Of
more than $4,000, 100000 year.
The pressure of money reacting on
limited supply of goods Is having its
effect despite the existing wartime con-
trolls. As one illustration, the prices Of
wholesale commodities now are at a new
wartime high, 40 per cent above August,
1889, and are rising. Farm prices are
125 per cent above the August, 1899,
level and are rising steadily. Living
costs are at new wartime high. Wage
rates are IS per cent above 1899 and are
moving steadily higher, as one group
after another obtains concessions on the
| ground that living costs have risen or
that some other factors justify increased
| income.
At the same time the public Is be-
ginning to show a lowered opinion Of
the dollar and is showing less regard
| for War Savings Bonds.
Fantastic prices are being paid for
| jewelry, furs and other uncontrolled
| items. Farm land prices are rising as
indications accumulate that people with
money are interested increasingly in
land. There is growing boom in i'm
proved city real estate. Spending on
pleasure never before was so great.
New sales of United States Savings
Bonds, when offset against cashing Of
those bonds, are running at a rate far
below year ago. In the fiscal year
ended last June 3O the Treasury real
lied more than $4,000, 900 900 from these
sales after offsetting redemptions. It
is estimated that not much more than
$1,000, 100000 net will be realized in the
current fiscal year, even though the
public has more money to put into
bonds than ever previously
| This situation needs to be viewed
against the background of growing pub
lie irritation with wartime controls and
against the fact that scarcities of goods
are to become more acute as the war
goes on. Public appetite for goods is
| to be increased by further delay in sat-
isfying that appetite. The result can
be scramble for goods in the period
after the wars end that would send
prices sharply higher.
| Nobody expects, however, that there
VIII be a runaway price rise, one that
would get completely out of hand and
end with destruction of many values.
What is in prospect is a rise of substan.
tial proportions that will dissipate the
public's spending power more rapidly
than otherwise would be the case and
thereby confront the Government with
the problem of finding ways and means
to keep the economic machinery working
in high gear.
| The increase in wage and other costs
is so great that industry will be forced
to increase its prices substantially above
the l941 and 1912 level If profit margins
are to return to normal. These increased
| costs alone suggest that costs of con-
struction are to be about 80 per cent
above the prewar level when private
| building Is revived. Automobiles are
| likely to be priced considerably above
the price Of 1912 models. Price rises can
be expected all along the line, except in
| farm commodities which have risen out
OF proportion to other commodities.
Danger in the present situation lies
In the fact that the public, irritated
| with wartime controls, will force aban-
| donment of those controls soon after
the wars end. In that period the de-
mand for goods will be unprecedented.
Without rationing and without price
control, that demand, reacting against
limited supply. could touch of much
greater price rise than is justified.
rise in prices after the war, In turn,
will add to maladjustments and compli-
cate the problem of maintaining a high
level Of activity over a long period Of
| time
There no longer is oficial acceptance
OF the idea, advanced by some of tho
New Deal economists, that the war will
be followed by reduction in prices due
to the ability of industry to turn out
unlimited supplies Of goods. Instead, it
is being recognized that a war running
through 1945 will complicate the prob
lem Of avoiding serious price imitation
in the postwar period.