Equilibrium creates purchasing power;

              Bulletin HASKINS & SELLS 7
Equilibrium Creates Purchasing Power
IN The Chase Economic Bulletin of June
12, 1931, Benjamin M . Anderson, Jr.,
the economist of the Chase National Bank
of the City of New York, presents an inter­esting
discussion on the subject of economic
equilibrium versus artificial purchasing
power.
Dr. Anderson discredits the principle of
wooing prosperity by the institution of arti­ficial
means of maintaining or increasing
purchasing power by such measures as ex­panding
bank credit, buying of bonds by
commercial banks, increased lending,
spending rather than saving, the Soldiers'
Bonus measure, heavy borrowings by gov­ernments
for the construction of public
works, artificial support of markets, and
artificial maintenance of prices by govern­mental
valorization schemes.
In place of these he advocates a proper
balance among the various types of produc­tion,
as agriculture, raw materials, manu­facturing,
and transportation; proper bal­ance
between the prices of goods and the
costs of production, including wages, so
that profits are possible; stimulating enter­prise
to increased activity; proper relations
among the different kinds of goods; proper
relations among retail prices, wholesale
prices, rentals, etc.; proper balance of "ex­ports
and imports, taking into account the
invisible items of the international balance
sheet; proper proportion between the flow
of goods and the flow of credits in interna­tional
relations, and a proper balance in
the money and capital markets.
Dr. Anderson points out that the great
depression is due to an unbalanced eco­nomic
situation. Production is unbalanced;
prices are unbalanced; costs have not fallen
as much as prices in many lines. The inter­national
balance sheet is sadly unbalanced.
The money in capital markets is in a state
of unbalance, etc. As to wages, he says
that wage rates cannot be held inflexible
when everything else has changed, without
gravely retarding the process of recovery.
The equilibrium view relies upon the au­tomatic
forces of the market places to re­store
equilibrium when it has once been
broken, instead of looking to governments
and to central banks.