DEFLATIONARY MOVEMENT.

New Zealand Herald, Volume LXVII, Issue 20538, 12 April 1930, Page 11

DEFLATIONARY MOVEMENT.

BRITISH WHOLESALE PRICES.

FALLING TENDENCY CONTINUED

The. fall in sterling wholesale prices which made almost uninterrupted progress during 1929 gathered increased momentum during the first month of the new year, says the Statist. Over the whole of 1929 the fall in sterling wholesale prices amounted to 7.7 per cent. The further downward movement during January alone amounted to as much as 2 per cent. The index number at the end of that month was 8.9 per cent; lower than the corresponding figure of a year ago, and the latest fall in the index has narrowed to 31.3 per cent., the margin that still separates the current level of sterling wholesale prices from that which obtained prior to the outbreak of the war.

The deflation in security values and abnormally high money rates wfiich characterised the past year were generally expected to have deflationary reactions on commodity prices and, as the recent economic history of the world has proved, these reactions tend to be spread over an appreciable period following the break in the previous speculative movement. The return to generally easier monetary conditions should ease the situation, "and help to check the further fall in prices, but it. is doubtful whether the reduction in money rates has proceeded rapidly and drastically enough to be really effective in this respect. It is not only the rise in money rates over 1929, but the stoppage of capital exports from the principal financial centres of the world, which is responsible for fiie weak position of'a number of basi,c commodities. The fall in wool, coffee and wheat prices were largely responsible for the difficulties of countries such as Australia, Brazil and Argentina, but, it may be argued that, these difficulties would have been largely avoided had capital been able to flow to these countries at the same rate last year as had j been maintained in the immediately preceding period.

"The deflationary influences have been world-wide in their scope, and have affected prices in all gold-standard countries," tlie Statist adds. "The problem of the future commodity value of gold is undoubtedly one of the main issues facing the world to-day, and it is to be hoped that llipl lip year 1930 will see the beginning of some intelligent co operative effort on the part, of the central banks of the world to deal with it."