REDUCING PRICES

Northern Advocate, 29 September 1920, Page 2

REDUCING PRICES

By Way of inducing merchants to set fre , ? their accumulated stocks, and so reduce the cost of living, it is proposed j in Great Britain to put up the cosf of money by increasing the bank rate of interest. This seems a lather complicated and curious process, though it is obviously sound enough in its intention. So long as money is reasonably cheap merchants can afford to lock it up in the form of stocks of imerchandisc, but an increase in the rate they have to pay for the use of money will affect- the revenue-producing part of their business and if they have a great deal of capital lying idle they will suffer a loss on it. They will be the gainers therefore if they realise on their stocks and turn thir money over, so that it may again be made reproductive. When they begin to unload their stocks, and so help supplies of merchandise to meet- the demand more nearly than they evidently have 'been doing, prices will fall, and, though it may seem rather paradoxical, it will pay merchants and manufacturers betIcr to take reduced prices, and secure funds with which to carry on their operations, than it would to hold their idle stocks. The process, of course, will not go on indefinitely; it may not even continue until the accumulated stocks of merchandise are exhausted; but at any rate it will go far enough lo afford a measure of relief to the consumers, and the Government's purpose '. will be achieved. The fact that action is being taken at the present time does not indicate that there has been, no j reduction of prices in the Old Country; on the contrary, theie has been a decided downward tendency during recent months. Statistical records, compiled in similar fashion to those with which the Government, Statistician has made us familiar in this country, are carefully kept, and the London "Times" systematically publishes the index numbers of wholesale prices for the United Kingdom. It is shown that during May, June and July the prices of food and materials declined by 23.4 points, or 7.G per cent.' In June there was a drop o? 10 points as compared with May, but in July the further drop was only 1.6, and this was due wholly to a fall in the prices of certain food products. The. index number for materials' alone was nearly five points higher in July than in June. This perhaps was clue in some measure to the hoarding of stocks, the evil which tjho authorities are now seeking to remedy. It is interesting to .note that tho "Times" regards the check in the rapid decline of prices as anything but an evil, holding that a too rapid fall would inevitably lead to the checking of production, which would prepare the way for anotihor sharp up- I ward movement. A suddon fall in , prices would probably eauf-e widespread unemployment and suffering. A gra- j dual lowering of prices is the besti remedy for the present difficulties, but the recurrent labour troubles are a serious factor, stoppages of industry upsetting calculations altogether. The big miners' strike, if it is not, averted, .will add enormously to the difficulties which confront the Britisn people. That possibly is one of tho reasons why an effort is being made just now to bring the stocks of morc/handise into the market.