Evening star. [volume] (Washington, D.C.) 1854-1972, 1949-06-02
Our Economic Showdown

The extraordinary and prolonged Ietn-
argy of the stock market is merely one Of
the many symptoms of the showdown that
has been taking place in the Nations
economy for some months past. The acute
shortages caused by the war are at an end.
Production has caught up pretty much
with demand. The long infationary boom
period has largely spent itself, and we are
whose true significance Is still being de-
bated by the experts.
Some of those experts are pessimistic.
They think a depression, or at least
serious recession, may be In the making.
The lethargic stock market is not the only
thing that disturbs them. They are
worried by the fact that most industrial
groups have reported a substantial drop
in production and that unemployment
now in the neighborhood of 5000 00o-has
increased markedly since last fall, though
some of it has been seasonally natural.
They are worried, too, because bank credit
to private borrowers has contracted
sharply, the Federal Reserve System re-
porting that its members loans during
the first quarter of this year declined more
than a billion dollars as compared to an
increase of $400, 900 900 in the correspond
ing period last year.
Further, with buyers market replacing
the sellers market that has been dominant
for almost all of the past decade, the pes
simists are afraid that public psychology
may tend to be economically unwholesome
Thus, falling wholesale and retail prices
have already encouraged many prospective
customers to defer their purchases In the
hope that there will be additional declines
According to the worriers, If this attitude
becomes widespread, If consumers in gen.
eral postpone their spending in order to
wait for bargains, the resulting lack of
demand will cause production cutbacks,
which will lead to more employment layoffs
which in turn-together with such things
as listless stock market and contracted
bank credit-will give whirl to the kind
of vicious circle that could spin our econ
omy into deep depression.
Other experts, however, take an optimis-
tic view of the situation. They feel, for
one thing, that doubts about taxes and
new labor legislation have played an
important part in the showdown and that
they will cease being psychological deter
rents as soon as Congress lets the business
community know what to expect. Beyond
that, in the opinion of these more cheerful
observers, the basic factors in our economy
are so encouraging that serious recess
sion seems unlikely in the extreme. Local,
State and Federal government spending,
for example, has increased upwards of
100000 over the total for 1948-a
rise that largely offsets the drop in expend-
itures by consumers and private enter
prise. Moreover, the need for housing.
industrial equipment and durable goods in
general is still very great, and the income
and purchasing power OF the American
people-who now are burdened with con-
siderably less personal debt than in 1910
remains enormous.
As for the current tendency of the buy
ing public to postpone their purchases
while waiting for additional price declines,
what is needed-as many businessmen and
Government officials like Chairman Nc
Cabe of the Federal Reserve System have
been arguing-is return to prewar mer-
chandising methods. During the war and
until recent months, the sellers market
made 1t unnecessary to 60 out looking for
customers. But now, with supply begin
ming to balance demand, the consumer is
choosy and dynamic salesmanship Is re-
quired to get him to buy things.
In sum, according to the optimistic
experts, there is nothing wrong in the
business outlook that enterprise cannot
cure. The showdown, as they see it,
represents a salutary "disinf1ationary"
transition from boom conditions to con-
ditions Of stability which should last for
some years to come because of the basic
soundness of our economy.