Up or Down

It seemed last week that U. S. business was at a crossroads. With minor fluctuations, indices remained static at about the same level as the last four or five weeks. Economists wondered whether this was the basement of the Roosevelt Recession or only a landing on the escalator to ruin. As the President's inflationary plans for reviving business gave stocks and commodities a brisk rally, there were champions for both sides of the question.

Unlike most investment houses, the Wall Street brokerage firm of Carl M. Loeb, Rhoades & Co.. dealing largely in securities and commodities, last week chose to be optimistic. Reckoning that inventories are now notably depleted and that the slump has been accentuated by the advancing of the Automobile Show from January to November, it noted in a memorandum to customers "that business has actually been doing better during the past two or three months than is generally believed and that there may be some upturn in industrial activity during the ensuing months. . . ."

In harmony with this outlook came a chirpy release from the Department of Commerce, whose head, Secretary Daniel Roper, has been bullish all through the decline. Unwilling to predict, the Department of Commerce merely asserted that the decline has pretty well come to a halt.

To Colonel Leonard Porter Ayres, whose frequent sound-offs in news letters from Cleveland Trust Co. are the favorite economic reading of most U. S. tycoons, this was all so much balderdash. Remarking on the railroad crisis, stagnation of new building, lack of substantial upturn in automobile production, fall in security prices, increase in unemployment and lack of a spring upturn. Colonel Ayres decided that the present lull is only the end of the first stage of a major depression. Gloomed he: "The physical volume of industrial production appears to have dropped to more than 40% below the computed normal level in March. . . . There has been only one year in all our history when production averaged more than 40% below normal and that was 1932, at the bottom of the depression. It now seems probable that 1938 will be the most severe depression year in our history except 1932."

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