Doubts and Stimulants

Doubts and Stimulants

Last week, after a few months of recovery, U. S. business had regained 55% of its Depression II losses. And for the first time since recovery began there appeared visible doubt as to its continuance. Most visible sign was the stockmarket's third successive week of reaction. Although no slump appeared in production indices-- power, building, autos continued up-- there was distress in two prime measures of public demand for goods; a rise was seasonally normal and money supply was at a peak, but nationwide bank debits and bank clearings tumbled. If such an unbalance--production rising, demand falling--were to continue, another inventory surplus might ensue.

Current slowdown was variously attributed to uncertainty over the new Congress, worry over international squabbles, timidity engendered by the start of the "opoly" hearings. More tangible is the point that the Government's spending, even though operating at a level $400,000,000 greater than last year, is again proving to be a mere teaser. All this greatly amused Germany's Reichsbank Governor Dr. Hjalmar Schacht. With German industrial production up 100% in five years, he took occasion in a Berlin speech to praise a "directed economy," crack that Germany had not needed to "finance consumption through the arbitrary scattering of money by the State. . . ."

The bright and brand new idea in U. S. economy, as opposed to "directed economy," is, of course, that Government should spend as the tide of private industry ebbs, and vice versa. Last week Chair-man Marriner Eccles of the Federal Reserve Board told Manhattan bankers that since private industry is still not ready to take up the burden the Government has no choice but to continue pump-priming.

In sharp contrast to Marriner Eccles, the overwhelming majority of U. S. businessmen agree that if U. S. prosperity is forever going to depend on Government spending, the stretches of prosperity will be short, however sweet.

Meanwhile, the particular brand of spending which is on the way, with hearty approval on all sides, is rearmament. Last week Banking declared that it would be a "Business stimulant of first importance in the immediate future." Like all spending, the blessings of rearmament are short-lived. It helped England for a year but last week England's plight was reflected in the fact that the pound sterling was under such pressure that the price of gold in London went to the highest level in history ($34.70). There were persistent rumors that further devaluation of the pound was the only recourse--and when Britain left the gold standard in 1931 the U. S. suffered 18 months of deflation.

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