THE Wairarapa Age TUESDAY, NOVEMBER 30, 1937. WORLD PROSPERITY.

Wairarapa Age, 30 November 1937, Page 4

THE Wairarapa Age TUESDAY, NOVEMBER 30, 1937. WORLD PROSPERITY.

A measure of industrial docline in the United States during the present year and* a much more marked decline in the values of stock exchange securities in that country, with repercussions elsewhere, have inspired in some quarters uneasy fears that the world may be threatened with a repetition of the great depression which began with a cataclysmic industrial and financial collapse in the United States in 1929. one can - say* With assurance precisely what is going to happen, because slumps, when they occur, are accounted for in a consider* able degree by an unreasoning r and therefore incalculable, element of panic. Weighty evidence is advanced, however, in support of a contention that recent and current developments in the United States do not in any way warrant an anticipation that the unhappy experience of 1929 and the years that followed is about to be repeated. / < Some people have asserted, in effect, that the present situation in the United States means simply that prodigality and political experiments in managed economy are working out badly. A scrutiny of visible factors and developments, by no means bears out this sweeping generalisation. The managed economy of t,he United States admittedly ‘is still in fcomp ifiipoitant respects at an stage. On the other hand, it embodies safeguards, such as monetary stabilisation and control and the safeguarding of bank deposits, which did not exist in 1929. It is claimed, too, that tfie policy of the Roosevelt Administration has prevented! even a remote approach, to the tremendous over-expansion of. f speculation which had so much to do with the collapse? of 1929. Observing recently that there was no possibility of a repetition of the credit attrition which ran like a plague throughout the economic system in 1929-32, an American writer added:— Moreover, the Administration has a supply of accelerators and brakes in managing the system, even though they-do not work exactly according to plan. The brakes vere put on lasf year-end and this (northern) spring in an effort to ward! off inflation. They were too successful, and now the Administration is putting its foot on the “gas” again. It will be remembered that President Roosevelt was quoted not long ago as stating that the Administration would take up the slack of the economic situation if private enterprise did not do so. Leading developments of late in the American economic and financial situation may be summarised very briefly. Industrial output in the United States reached its peak in March last, when it stood at 118 per cent, of the 19'23-25 level. It remained constant for the next three months and then fell to 114 in June. The stock market break of which so much has been heard started on August 14 last, and from that date to October 14, American equities in stocks, as indicated in their market quotations, showed a decline of 17,000 million dollars. The decline was expressed as thirty per cent, of the average value of sixty stocks. As against the fears awakened in some minds by this landslide, it is contended by authorities of standing in the United States that there is no reason to anticipate a general fall in commodity prices like that which heralded the slump of 1929. In the process of American recovery, there has been a great expansion in the production and disposal of consumers’ goods, but a failure as yet to bring about a similar expansion in capital goods industries—steel production, machinery making, etc. For the first nine months of this year, new capital issues in the United States

average about 190 million dollars a month, as compared with a monthly average of 850 million dollars in 1929. High costs are checking both the expansion of industrial capital equipment and building. On the other hand, there] has been a healthy abatement of the insane speculation that ran riot up to 1929. This is accounted for partly by measures of control under which American investors, until -the beginning of this month, were required to put up 55 per cent, of the price of stock purchased—about six times the amount of cash the customer was required to find in the days before the great depression. The margin is stated to have been lowered now to forty per cent., but even at that level will impose a much greater check than formerly on speculation. Although allowance has to be made always for incalculable factors and the possibilities of unwarranted panic, there are substantial reasons for believing that the existing state of affairs in the United States is correctly regarded as what the National City Bank of New York has called “ a resting point in the climb,” rather than as a prelude to serious and lasting depression.