Evening star., 1949-05-01

/ "a ~ AAAA4S ss@Ass sNeNAt sS@~%<"
ifests itself In . sharp advance IN
the price Of everythlng. thus rsss-
/ ing costs and reducing the stand
ard Of living.
| DURING World War l money and
price imitation occurred simulla-
lneouSly IN the United States,
Money TO finance the ~ar sas
printed without resard 10 It's
soundness, and the price Of every
thing rose. But daring World
War II. these tao phases Of The
wartime imitation were separated
by price control and rat!ontng
While the Government printed
vast quantities Of money teasisy
monetlxed bonds IN order 10
/ finance the war. II held the prices
I OF everything in check through
controls and raiioning. But when
hostillties ceased and IL was 10
/ longer necessary TO spend huge
sums for war purposes and The
budget Was brought into balance.
the money imitation ceased, As this
phase of the wartime imitation
ended, price controls and ration
ing ceased and the excess money
/ printed during the VAR freely
went out on q purchasing errand
Since everything vas still In short
supply. the wartime price infia-
ton. which was postponed by
price controls and rationins poll
Icies. began with \ vengeance. In
turn, high prices stimulated pro-
duction and this worked as q
cure for the price inflation--just
as cessation OF spending for war
purposes worked as a cure for the
money imitation.
Currency Drop Due
Today. wartime imitation Is end
ing and the world Is in the throes
OF q normal transition from an
economy OF scarcity 10 one Of
abundance. Defiation is now our
problem. and as producers offer
goods. which are now IN abundant
supply. buyers bid lower and lower
prices. Thus struggle for mar
kets Is beginning. When this
spreads TO the international
sphere and price cutting is en-
ployed as means OF capturing
markets. we shall witness curren-
cy devaluation. for this Is the
level on which the struggle for
markets takes place.
During the war and the postwar
period. normal international set
Elements were suspended. Grants
and gifts from the United States
supplanted normal trade among
nations. Lase-lend. United Ma
tions relief and ECA are merely
artificial economic devices designed
to supply countries unable 10 pay
for imports from the United States,
The Marshall Plan tECAl financed
imports not only from the United
States to various countries, but also
among those countries. Moreover.
among the exports from the United
States were large quantities Of cap
ital goods. These capital goods
rebuilt European productive Ca
pacity. Thus through the rebuild
ing OF Europe's industrial plant.
production OF Western Europe has
been greatly augmented until to-
day surpluses exist for which mar
kets must be found. To sell these
surpluses price concessions will
undoubtedly be made. These price
concessions will inevitably take the
form OF currency devaluations.
Hence during this period of ad-
justment from imitation TO defla-
ton. important exporting nations
are likely soon 10 engage In cur
rency devaluation operations. A
similar adjustment following World
War I gave rise TO the l92o-2i
stock market collapse and the
general economic recession OF that
period. That a similar repcrcus-
sion will be felt In the present
period OF adjustment hardly any
one doubts.
Story OF Collapse
Following the 1919 armistice. a
defiationary process began TO de"
velop in this country. This prom
ised TO cancel out much Of the
wartime imitation. But as an
enormous volume Of export trade
with Europe soon began TO de-
velop. the defiationary trend vax
reversed and q postwar boom got
under way. In retrospect we see
this boom was based almost wholly
upon artificial values impaired 20
European curreneies used TO pay
for exports from the United States,
For four months following the
armistice. Britain. using money
borrowed from the United States
Treasury. was pegging foreign ex-
chanae--francs and lire, but. above
all, steriins-at fxed relative
prices.
On March 20. 1929. J. r. Morgan
a. Co, which had been acting for
the British :, government. ''un-
pegaed" the pound sterling and
with IL the franc. the Ira and
other continental currencies. Prom
Armistice Day TO June. 1919. the
United States Treasury supplied
| approximately $4,000 900 900 In
loans to peg" and. after the
''peggings ceased. 10 support for
eign currencies and the export
trade which was being paid for
with these over-yaiaed currencies,
When the United States Treasury
discontinued advancing dollars for
this purpose Britain. inserposing
her immense credit and great
financial prestige. borrowed from
Iprivaie sources In the United
States In order 70 continue this
support
| she then began supporting the
pound sterling and with II ps1r-
chasing goods In the markets Of
the world. principally In tlse United
States and selling them on the