Turn-Around in Raw Material Prices?

Abstract

A RE WE ABOUT TO AWAKEN TO THE FACT that dollars are not necessarily the ultimate measure of wealth accumulation? Are we about to realize that commodities are more valuable? Are we beginning to recognize that money must be a store of value, as well as be a handy medium of exchange of equal value to all people, if trade between all people is to prosper? These are the profound questions that seem to be coming into many of our minds. Profound changes are apt to be seen if these questions are becoming uppermost in many minds, because of (1) the unfolding of recent events, and (2) the long continuation of trends like the gold outflow of which the Financial Analysts Journal has informatively published many articles during the past. In November, 1958 the Financial Analysts Journal published an article entitled Deflation-What Is It? The study surveyed Stock Prices, Commodity Prices, and the Ratio of Gold to Currency from 1860 to the date of the article, as well as the experience of the various groups of common stocks from 1872 to 1896, commodity prices were suffering their long post Civil War decline. The article found no barometric value in the ratio of gold to currency, even though it seemed to be a thermometer of sorts, and that investors seemed happiest the ratio was enjoying gradual rise over some years. The stock market seemed to appreciate stable commodity prices over violent moves, either up, or down. The 1958 article pointed out that stocks in utilities, services, communications, sugars, and growth issues like rails and cables, as well as stocks that did not depend on an uptrend in raw material prices, did well for 30 years after the Civil War commodity prices declined. The study suggested that post World War II had similarities to the post Civil War, and that some indications might be given to 1958 stock market selections from a study of past post war deflations in commodity prices. The study also indicated commodity price troughs might be expected. Of particular current interest is when will the decline in raw material prices end? It has been going on since 1951. Many of the troubles in underdeveloped countries stems from the long decline in raw material prices. The long decline in raw material prices has made many observers believe that there has been no inflation of our American credit-money, because they reach the easy conclusion that monetary inflation means high prices for everything. The long decline in raw material prices has made the farmer and the rancher (who has suffered a 40% decline in steer prices) less able to pay the higher consumer prices. Consumer prices have been advancing since 1951 and wholesale prices have been flat.