Evening star., 1952-08-24
Beating Inhotion-
Besides Hedging Against Rising Prices,
You Have to Watch for DefIotion Signs
By Robert 7. Peterson

The first question q person is
likely to ask when he becomes aware
of imitation is. what can I do to
protect myself and my family
against it?"
The answer isn't an easy one, for
he has to consider, first, how to hedge
against an inflationary rise in prices,
and second. how to be protected if
the imitation Is halted and there is
q decline in prices.
It is a grave problem for the great
middle class, those who have some
savings, who own q little property
in some form or other. The wealthy
can cushion themselves against both
imitation and detlation. The poor
have no savings to protect. Their
problem is to subsist-to make ends
meet-as the cost Of living rises.
It has been apparent for some time
that currency imitation isn't mere
bugaboo of certain economists.
There has been so much talk about
it for so long that many people have
revised their financial programs.
They realize that savings placed in
banks, building and loan associations,
bonds and mortgages can buy only
half what they could before the war.
# the dollar continues to depreciate
such savings will be worth even less.
Common Advice
People are often advised to pro-
tect themselves against imitation by
placing their savings In equities such
as land, buildings, common stocks,
mineral rights. goods. or commodi-
ties. The theory is that equity in
vestments will increase in value along
with any general rise in prices.
The German experience with q
wild imitation, which eliminated in
1928 when the mark fell to one
trillionth of its 1918 value. Is an
extreme example Of what can happen
when q nations currency gets out
Of control. We are far from being
in the situation that Germany was,
but what happened there shows dra-
matically the havoc imitation can
wreak in savings. It also shows that
So-called hedges against imitation
are far from perfect protection.
Savings accounts and most bonds
became worthless. Insurance kept
about per cent Of its value, and
endowmentS and trusts about IL per
cent. Real estate retained about 40
per cent Of its value. Such common
stocks kept pace with the rise in
prices, but others didn't; and some
became worthless. Commodity prices
rose to astronomical figures.
From this, it would seem, the thrift
ty should place their funds in COM
modities and selected common stocks.
Other ways Of hedging against infla-
ton are sometimes suggested. A
person might spend accumulated saw
ings on goods that eventually can be
used and may later be more expen-
sive. Or he might buy newly mined
gold (the Government permits this,
although it forbids possession Of gold
coins) or diamonds (the resale value
Of which is always far below retail
prices). Still another way is to bor-
row money and use it to acquire goods
and equities.
The 'Cotch'
The great "catch" to every method
you can use to protect yourself
against imitation is that either its
impact on prices may be delayed or
the imitation may suddenly be brought
to halt. What is not always recog-
nized by economists when they dis
cuss inflationary price trends Is that
they may be interrupted from time
to time by sudden def1ationary cpl