The Painful Process of Readjustment; Causes of the Present Stagnation The monthly review issued by Barelay's Bank contains the following article on readjustment in the United Kingdom, It has long been obvious that price inflation would have to stop somewhere, though the realization that the readjustment to healthier levels was bound to prove painful has resulted in some resistance to the process. Fortunately, however, many business men have for some time past recognized the quite precarious nature of operations which depended for their success upon the future course of prices, and they are thus able to face the present position with comparative equanimity. There are naturally a number of '"'sticky'' positions resulting from cancelled contracts, from an unexpectedly heavy fall in prices in a particular market, or from lack of reasonable caution, but on the whole the genera] situation, as far as it can be seen_at the moment, is better than might have been expected.
In considering the inevitableness of the present position, we fave to remember that conditions during the past few years have at bottom been extremely unhealthy. They have been based on reduced ys oduction, wasteful consumption, lessened savings and a plethora of inconvertible paper money.
An Enp ro Uncertarnty.
With prices stabilized, levelopment work will become more possible, while one of the chief causes of uneasy politics and social unrest will be removed. Wage-earners will obtain a real increase in wages, while, if profits are expressed in lower figures, each unit will represent a greater value. Moreover, the uncertainty which has overhung and hampered business since the war will largely be removed, and if fortunes suffer diminution, the—position of their owners will, at any rate, be less precarious. It is also necessary to remember that prices have outrun demand, and a reduction to a point at which demand will revive is essential to the removal of the existing trade depres-
We have unquestionably entered upon @ period of depression, but in a s this is a neces pre-to any movement towards it is to be welcomed, provided liquidation is not foreed unduly, Tu point of fact, it is pro-Lable that certain wholesale prices have already been forced below cost of production. Such a position cannot continue indefinitely and is to be regretted. On the other hand, retail prices display considerable reluctance to move in sympathy with wholesale prices. This also is unfortunate, for lower retail prices would provide a stimulus to renewed buying.
Prices ann. Livine Costs.
The movements in wholesale and retail prices are reflected in the table givea below. To some extent the cost of living figures are obscure ed by the inclusion of rent and also of certain commodities, the prices of which have been, or still are, controlled, but they are the only ble index of the relation of el "Keonomist Index Ministry of Labous, Number.
(Cost of living.)+ (Whoiesale Prices.)* Bu (avg.) 1901- Basis, July, 1914= 00, 100.
374.2 End April 24s 372.7, May Tune October Foodstuffs, "Minerals and Sun. Food, Rent, Clothing, Fuel, Light, ete.
dry products.
While it is almost impossible to forecast the duration of the present depression, it may be useful to consider certain of its principal underlying causes. The first is psychological, for great masses of people throughout the world are holding off from buying in the hope of lower prices. The effect of such mass psychology is very difficult to estimate, but it would seem that. people are abstaining from buying for two reasons. In the first place, they are wait for stock which—are known to be unsaleable at present. prices, to he liquidated at lower levels, and in the second place, they are waiting for the fall already noticeable in wholesale prices to be reflected in retail prices.
Text read from the printed page and cleaned; old type leaves the occasional error.