The Waikato Times. with which is Incorporated The Waikato Argus. WEDNESDAY, NOVEMBER 10, 1926. AMERICAN PROSPERITY.

Waikato Times, Volume 101, Issue 16948, 10 November 1926, Page 6

The Waikato Times. with which is Incorporated The Waikato Argus. WEDNESDAY, NOVEMBER 10, 1926. AMERICAN PROSPERITY.

The favoured people of the United Stales are evidently enjoying a wave of prosperity, whilst their less fortunate brethren in Europe are striving to balance their national budgets, pay their war debts, and contending with adversity. The cablegrams yesterday informed us that President- Coolidge has announced another reduction in taxation, probably totalling £50,000,000. It is estimated that during the past two years the taxation reductions have totalled £190,000,000, and measures are to be Jntroduced into Congress next month authorising a refund of from 10 to 12 per cent, on the taxation on incomes paid during 1925 and 1926. The position is unprecedented, and its causes and probable duration are receiving much consideration. Thus the New York Times in a recent issue commented: "While evidence of continuing prosperity grows convincing as autumn approaches, it is Interesting that comment is made up largely of explanation why activity should keep up, instead of being interrupted by reaction in general trade. One might have looked for unqualified prediction of good times. An immense, balance of export trade in this country's favour, continued flow of gold into the United States, accumulation of capital, from home and foreign sources, such as enables the American market constantly to enlarge its loans to the outside world—these are phenomena of the kind which used to be accepted as the best assurance for the future. Yet it is not many months ago that expert prophecy seemed to agree in foreshadowing for this autumn a halt in the forward movement. That it has not happened, the evidence seems to be conclusive. Production in most of the larger American industries has been running, according to the Reserve Bank's percentages, 5 to 15 petcent, above the high rate of a year ago. Goods distributed by the railways, measured by the weekly 'carloading' statements, have this month (September) exceeded all precedent. To what extent consumption is keeping pace with production and distribution is indicated both by absence of any large accumulation of unsold goods and by greatly increased sales, as compared with last year's active season, at department stores and mailorder houses. The doubts which prevailed six or eight months ago arose partly from the traditional belief that two or throe years of high prosperity were bound to bo followed by a 'business setback.' More particularly, they were based on misgiving as to the sequel of an overdone 'building boom' or the outcome of nation-wide 'instalment buying.' But neither consideration appears to have impeded continuance of good limes. The building boom has visibly been checked and the land speculation has ceased abruptly; but except, for the failure of a few unimportant banks of mushroom growth, the credit situation docs not seem to have been touched at all. Instalment buying—nowadays carefully watched by bankers financing it, with a view to keeping inilial payment and term of instalments within the range of safety—has continued without the disturbance of the volume of new purchases or the profits of trade. Explanation of this immunity has taken various fornix Mr Julius Barnes ascribes it to the country's great stores of raw material, its intensive industrial production and its political stability. But these things are not new; they existed in 1920, when violent reaction overtook American trade. The British engineers whose recent report on our position set England to thinking ascribed outincreasing trade activity to tho high wages paid to labour and the consequent increased buying power of the people. No one doubts the importance of this; still, it is reasonable to suppose that at some point a constantly increasing wage scale would cut down normal profits of industry unless prices of goods were advanced proportionally, and the movement of prices has been downward. The mechanism of such former trade reactions as have followed a period of high American prosperity has been pretty uniform. The 'business boom,' in typical periods like 1919, 190 G, 1901 and 1890, was invariably accompanied by continuously rising prices. Those higher prices, applied to rapidly increasing production, consumption and speculative accumulation of goods, greatly increased tho cosl of doing business and drew heavily on the supply of tloating credit. Money rose to high rates, usually at the moment when unsold stocks of merchandise were greatest and when individual consumers were beginning to restrict their purchases. Some rash borrower or trader came to grief; the general trade reaction followed. it is impossible lo doubt that lite policy known as •buying for visible requirements,' practised consistently and almost universally by merchants during the three past years, is one of the influences which have thus far averted such a sequel to Hie present period of prosperity. The Federal Reserve is admittedly a powerful regulator of the credit situation, but it was unable lo prevent the credit inflation and the resullanl crash 0f*1920. The two main aspects which bring the present era of American prosperity into contrast with previous epochs of the kind have been absence of overproduction unci overaccumulation of goods, and, partly | as cause and partly as consequence, absence of rising prices and absence of light money in the face of greatly

expanded trade. For the longer future, then, the problem of continuing: prosperity 13 whether these immunities from the old-time hazards of expanding trade can continue. The Iron Age, in a thoughtful editorial, admits the strong points of the existing situation; but it asks whether we can be wholly sure of what would happen if requisitions of consumers were at some future day to run beyond capacity of producing plants, or the even course of production and distribution were to be interrupted by such occurrences as the coal and railway strikes of 1922." .