Evening star., 1948-08-22
BY Roder Winqet

TO the depression Of 1920-21.
There are important difference
to say: ut can't happen again.
But the question renains-is ther
q lesson for us in q review Of tn
precrash months of 1920?
A comparison Of domestic and in
ternational political events then ant
now make strange picture.
Sounds Familiar
The Russians were fiexing thei
military muscles and talking peace
All the while there were small war
being waged in scattered isolation.
America was acutely conscious o
native communism, and thousand
were arrested in Nation-w wide driveI
to protect the Government.
CLASH BACK: Bolshevist
Maxim Litvinof said: "The world
wants peace, and peace is coming
all the more quickly and more
thoroughly as the Red Army
demonstrates the power OF Rus
sia.O
illinois States Attorney Hoyne
said: "A gigantic conspiracy has
been formed throughout the
United States to overthrow the
United States Government -.
The conspirators propose to es-
tablish in this country Soviet
form of government patterned
after the present form of govern
ment In Russia.~
Harding and Cox battled it out
for the presidency, while in Antwerp
the worlds athletes fought for
Olympic honors.
Post-World War I aid to Europe
begged down because Of rising
American prices which not only put
q strain on domestic economy but
also cut down European buying in
America. There is a somewhat
similar strain now, although it is
agreed that Marshall Plan aid to
Europe is being handled more
smoothly and is more effective today
than after the First World War.
Housing Critical Then
Interesting as a straw in the wind
was the 1920 drive by the British
for expanded export markets, just
as they are doing today, and the
fact that the French suddenly
turned in q bumper wheat cror
that made them nearly independent
Of our previously heavy grain ship
ments, just as is happening again
today.
Housing was critical in 1920. The
cost of living doubled In five years
Wages were high. Spending was
rampant. Dollar volume of retail
sales was up; unit volume was down
Many economists voiced warnings
of trouble ahead, but the people
listened most attentively to those
who said: Everything is lovely
FLASH-BACK: The Federal
Reserve Board said: General
anxiety prevails throughout
American business concerning
the continued advance Of prices"
wv. T. Kemper, chairman Of
the National Bank Of Commerce
and the Commerce Trust Co. of
Kansas City, said: Although
going through period of read
justment, we find nothing but
genuine optimism in Kansas City
and the Southwest
Price cutting was the signal that
led TO the collapse, the ensuing
panic, and the short but sharp de-
preston before recovery set in.
For several months housewives
had been boycotting high-pricec
butchers and clothing retailers
Chicago men organized a drive tc
wear shirts with soft collars cost
ing 81 to $3.50 because their Gus
tomary stiff shirts cost over IS and
their stiff collars 80 cents. Girls
pledged to wear paper hair ribbons
until silk ribbons came down.
Retailers Slashed Prices
The greatest phenomenon of the
whole panic developed in mid-May
Speaking with hindsight, it prob
ably was what broke the great in
fation. Retailers all over the Ma
ton suddenly started cutting prices
There was a sharp division over
whether price cutting was good or
bad. It's cause was variously
ascribed to congestion in freight
movement, tight money, profiteers
fears of Government indictment
and overproduction.
(FLASH-BACK: r. C. Leffing-
well, Assistant Secretary of the
Treasury, said: Government ex-
penditure is the root of imitation
- s.")
The cause Of imitation was com.
plex, but the explanation for price
cutting was simple-prices were toe
high and people quit buying until
they came down.
Here is what happened. People
didn't buy soft goods like clothes
retailers didn't order from whole.
salers, they in turn didn't buy from
manufacturers, and thus basic pro.
ducers found no demand.
1t was not until price cutting
spread into the hard goods lines
like automobiles and steel that peo.
pie were aware . depression wa.
under way.
Auto Industry Hit Hard
In New York's great postwa
automobile show In January, 8.
makes Of passenger cars and 8!
makes Of trucks were displayed. tn.
backlog Of orders was terrific
Delivery was on priority. "Slightl,
used" cars were advertised for i'm
mediate delivery. at a premium, ever
as today. ~.