UNEQUAL PROGRESS OF DEFLATION

Evening Post, Volume CIII, Issue 83, 8 April 1922, Page 4

UNEQUAL PROGRESS OF DEFLATION

The Federal Reserve Board of the United States reports that " the decline in prices of manufactured foods has not been as great as the shrinkage in value of raw materials, and the retail price index does not show a drop corresponding to that of the. wholesale price index. This indicates that manufacturing costs have not declined in proportion to primary production costs, and that the coats of distribution and of doing business "are disproportionately high." In endeavouring to explain their costs, in comparison with primary production costs, American manufacturers state that the war demand induced them to make additions to their works—additions that now call for interest and other overhead charges, but bring in no return. As an example, it is pointed out that a merger of, steel companies is planned for the purpose of reducing ■ this item of "overhead" and making it possible for these companies to compete with the United States Steel Corporation, which, with an eye to the future, refrained from adding to its plant capacity during the boom. [Possibly the meat freezing industry in this country could point to similar examples.] 'An American writer states: "The economic utilisation^ of increased manufacturing facilities 'will call for many transfers of ownership, with writing down of values, and in some cases with losses to investors who advanced the money for buildings." Writings-down that affect, real assets stand in a different class from the writing down of a mere increment in the paper value of a farm sold on mortgage. In the primary production world, the hardest class of case is that of the farmer who has made genuine improvements at high cost, and who now finds that the price of butter in the Old Country does not reach the interest line at this end— ■? or, if it sometimes does, threatens to cross the margarine line at the other end. • Between the farmer and the land-trafficker there is no. parity of merit, but the rain of deflation falls on them alike.