FORESEES 25 TO 35 PERCENT DROP IN PRICES BY SPRING

Prices will be 25 to 35 percent lower in the spring because retail prices, blocking the downward trend at present, will have to break then.

Prices are governed by the see-saw of supply and demand. When demand is greater than the supply, prices rise until the two are equal; conversely when supply is greater than demand prices come down notch by notch until the two balance.

Back in 1914, the outbreak of the World War brought a flood of war orders that increased our normal demand tremendously. Prices rose. When we went in three years later, it not only multiplied demand once more but it took some four million men out of productive industry. Prices climbed rapidly. When the war was won everybody felt that we would revert back to the "good old days." Instead of going to work to make up the shortage of goods, however, we experienced a general let-down in industry. Labor went on a vacation. Supply dwindled. At the same time the Government found processes of war financing. We had needed money during the war--so we printed it. We needed more after the war so we printed some more. Circulation per capita finally stood at $58 as compared to $34 in 1914. Increased money means increased purchasing power (in dollars) and great demand. Prices went up and up and up.

Reaction Has Set In

The reaction came, however, about the first of 1920, when the public finally decided that it had had enough. Demand fell off almost overnight and merchants found themselves with much merchandise and little trade. Wholesale business came to a standstill in many lines. Prices began to fall on raw materials and are being reflected in wholesale quotations. The following table will give you an idea of the effect of this readjustment on some of our staples. Commodity.  Jan.1920.  Present Price.  Percentage. of Jan. Price. Beans, bushel,  $4.65  $3.50  75% Cocoa,  .22  .10  45 Coffee,  .15 1/2  .07 1/2  48 Cotton,  .40  .22 1/2  56 Cotton Yarns,  .85  .45  .53 Flour,  16.75  11.00  68 Gingham,  .27 1/2  .20  74 Hides,  .55  .24  44 Leather,  2.90  2.40  83 Lard,  .25  .19  76 Potatoes,  7.50  3.25  43 Rice,  .15  .09  60 Rubber,  .48  .24  50 Silk,  17.80  5.00  28 Sugar,  .15  .12  80 Tea,  .31  .20  65 Tobacco,  .52  .30  58 Wool,  1.65  1.10  67 Worsted Yarns,  5.20  4.70  91

In spite of these cuts in wholesale figures retailers are making a desperate effort to keep retail prices up until they can "unload" their present high cost stocks on the public at "old.prices."

Cannot Hold Out After Spring

Needless to say they are meeting with little success. The public stands pat on its refusal to buy at exhorbitant prices. The retailers can stick it out a little longer but doing business with more clerks than customers is not profitable.

They may be able to hang on--to block the readjustment until spring but not any longer than that. A few far sighted merchants appreciate the situation and are already doing everything they can to bring prices down. They will be selling low cost goods as soon as present stocks are cleaned out and their competitors will have to come down to the new basis.

Wholesale prices already down 20 to 25 percent will doubtless drop 15 percent more during the winter. We will see this reflected in a 25 to 35 percent drop in the cost of living.

In spite of these cuts in wholesale figures retailers are making a desperate effort to keep retail prices up until they can "unload" their present high cost stocks on the public at "old.prices."

Cannot Hold Out After Spring

Needless to say they are meeting with little success. The public stands pat on its refusal to buy at exhorbitant prices. The retailers can stick it out a little longer but doing business with more clerks than customers is not profitable.

They may be able to hang on--to block the readjustment until spring but not any longer than that. A few far sighted merchants appreciate the situation and are already doing everything they can to bring prices down. They will be selling low cost goods as soon as present stocks are cleaned out and their competitors will have to come down to the new basis.

Wholesale prices already down 20 to 25 percent will doubtless drop 15 percent more during the winter. We will see this reflected in a 25 to 35 percent drop in the cost of living.