ECONOMIC CRISIS "IMMINENT"

Otago Daily Times, Issue 23577, 13 August 1938, Page 21

ECONOMIC CRISIS "IMMINENT"

LEAGUE EXPERTS' WARNING GLOOMY VIEW TAKEN NOT SO SEVERE AS 1929 (From Our Own Correspondent> (By Air Mail) LONDON, July 13. The phrase "imminent crisis" is used deliberately in a document prepared for the Financial Committee by League of Nations' financial experts, says a special correspondent of the Manchester Guardian writing from Geneva. The document has not yet been published, or has th- report of the Financial Committee, which used it as the basis of a discussion. The document says that the " imminent crisis" phrase is used " because the decline in commercial activity has assumed such grave proportions- at least in the United States, where the disturbance seems to have begun—that one can no longer consider it as a slight recession holding out the confident hope of an automatic recovery." It is implied that the "profound and disturbing change" that has overtaken the world's economy during the past 12 months is due to the recession that began in the United States and* extended, though less seriously, to the United Kingdom and France. Thus, though this analysis is confined to these three countries, it is pointed out that any crisis- beginning in the chief industral centres risks spreading to other countries. The gravity of the recession in the United States cannot be ignored, and its effects are being felt nearly everywhere. The document points out that during the first three months of 1938 world industrial production lost all the ground it had regained in the two previous years and was about 15 per cent, below that of 1929; the quantum of the world's commerce fell to 90 per cent, of the 1929 level; unemployment is on the increase in most countries; and far from having to concern itself with the dangers of an uncontrolled boom—which was the concern of several countries 12 months ago—"the world finds itself to-day menaced by a serious crisis. Almost Vertical Fall It is pointed out that in the United States industrial production fell by one third between December, 1936, and March, 1937, and that since August, 1937, the fall has been almost vertical. From a point of view of intensity and rapidity, the present occasion is said to be one of _the worst ever known in the United States—worse even than during the six months following September. 1929. In the United Kingdom the position is not nearly so serious, but in spite of the great expenditure on rearmament the document finds a general decrease in industrial and commercial activity and goes on to show that the fall in general indices for wholesale prices and commercial activity was at least as marked in the eight months following the maximum period of August, 1937, as during the eight months following the peak of August. 1929. It is pointed out that in addition to a decline in various bases of commercial activity the United Kingdom had nearly 100,000 more insured workers unemployed last April than in April, 1937, and nearly 250,000 more insured workers, partly unemployed. Similarly in France there has been a general decline since the end of last year. In giving a warning that a continuance of the worsening of the recession in the United Kingdom, the United States, and France would gravely compromise the recovery movement in all parts of the world, the document gives a reminder that the United States absorbs '4O per cent, of the world's raw material exports. It adds that already in many other countries economic indices have shown a tendency toward stagnation or recession.

In spite of the menacing outlook, there are several reasons which make the situation appear easier tc overcome than the crisis of 1929. These are: ■; There has been no serious credit inflation, and the monetary and banking situation in most countries is better than in 1929. Foreign short-term debts are less than in 1929, and the central banks and equalisation funds are in a position to meet all the international transfers. The possibilities of credit expansion are better,than in 1929 as a consequence of monetary devaluation. The world's stocks of raw. materials were, before the . recent increase, much less than in 1929. It is understood that the general trend of the Financial Committee's discussion was gloomy, and the general conclusion was that little can be done in the economic field while political unrest remains as it is.