BUSINESS RECOVERY.

Auckland Star, Volume LXIX, Issue 97, 27 April 1938, Page 4

BUSINESS RECOVERY.

HOPES IN AMERICA. REASONS FOR RECESSION. PEOPLE STOP SPENDING. (By CHARLES F. SPEARE.) NEW YORK, March 5. "After the collapse in securities, between 1929 and 1933, and the bank moratorium following, there developed a popular philosophy that it was not worth while to save money, for it had been found insecure as a bank deposit, ami subject to lieavy depreciation -when in the form of securities," states a Wall Street banker. '"'J.he psychology of the mass then was to spend. Now, we have a reversal of that attitude. 'J hose with idle money will not invest it, the producer will not add to his stock of goods and the consumer only buys for his day-to-day requirements." Fear of Investment. One of those appearing before the Senate Unemployment and Relief Committee recently was Ralph E. Flanders, a leading business man in northern New Englaiid and an economist of note. He gave an interesting sidelight on the cause of the picsent depression. In his opinion, the unused personal accounts in the banks and the cash balances of the life insurance companies arc responsible for the highest volume of deposits on record, coincident with a steady decline in commercial loans. There is the strongest evidence," lie said, that the holders of these deposits (hundreds of thousands of individuals) are unwilling to spend and afraid to invest." In business circles, this phenomenon is represented by general postponement of stock replacement, and frequent difficulty on the part of consumers in filling their requirements when they go shopping. Retail stocks are the smallest since 1936. 1' rom a policy of overloading their inventory accounts in 1936 and 1937, merchants and manufacturers have now gone to the other extreme. The effects are visible in the small changes from week to week in the indexes of business volume and in the growing totals of the unemployed. W'all Street feels the public's indifference in daily transactions that are the smallest in years and finds it necessary to contract its expenditures so that to-day there are nearly 30,000 fewer on its payrolls than a year ago.

From a technical standpoint, the cutting clown of production and the inevitable reduction of merchandise supplies strengthens one phase of the business situation. Eventually those will bring about a quick recovery and more feverish buying. In the iron and steel trade there were such symptoms this week when a fair miscellaneous demand for steel products was reported.

Disparity in Incomes. There is still a wide disparity between the losses in wages and salaries and the shrinkage in dividend and interest income. It has been found by recent studies that, where there has been much industrial unemployment, local stores have suffered severely, while in communities where a J salaried and supplementary income class | resides the purchasing power has held up, | but luxury buying has greatly diminished. One can hardly believe that even absolute repeal of offending tax laws would immediately resurrect business or that corporation management is to be destroyed because of the sustaining decisions of the United States Supreme Court regarding the N.L.R.B. decrees on company unions. On the other hand, confidence can be coaxed back by abstention from specific or implied threats against business and by the substitution of a little patriotism for politics in a critical stage, of the national economy.—X.A.X.A.