DEFLATION AND EASIER PRICES

Evening Post, Volume XCIX, Issue 122, 24 May 1920, Page 6

DEFLATION AND EASIER PRICES

World-markets' report falling prices in foodstuffs (partly seasonal), in wool, and in industrial metals.' The fall seems to be immediately, but nob wholly, due to the tentative efforts of Governments and banks in the direction of deflation; the Governments are making some move towards, living within their revenue, and the banks are trying to stop the allowance of the speculator without withdrawing the credit of the legitimate trader. Unfortunately, especially in a time like this, it is so difficult to distinguish between the speculator and the trader, and so hard to. hit the former a blow that does not fall on, or react upon, the latter. Note, for instance, how the magnificent prosperity of the cotton trade has been- used. Its overcapitalisation has been such that, according to Sir Herbert Dixon, writing-down and loss are inevitable; and what industry has escaped some measure of the speculation and inflation that mark the cotton trade? There are, of course, legitimate credit and illegitimate (speculative) credit. .. But the bedrock of all credit is public confidence, which is. liable to shrink and even disappear when financial punishment overtakes a. vast fatric of speculation; and when the rain of depression finally sets in, it falls alike on the just and unjust. If the intensity of 'the shock to credit is no greater than the intensity of the speculation, the result will be bad. enough; but it might be even worse. Let it be hoped that the steadying action of Governments and banks will be wisely directed, so that the brake will operate neither too eoftly nor too harshly, but with the greatest possible regard tq the common welfare.