Commodity Prices, Interest Rates, Building Activity, Automobile Production, and Retail Trade
This chapter deals with a group of subjects. They are closely interrelated, but frankly are treated together in a single chapter chiefly for convenience in presentation. Each might be made the subject of a chapter or even a whole volume.
The theory of price determination is rather definitely established. We know what the law of supply and demand is, and much about how it works in the case of a single commodity. It is very difficult, however, to generalize or to apply our reasoning to all commodities considered as a group.
The idea of a general level of commodity prices, or the purchasing-power of money, is broad and difficult to conceive, being influenced not only by the supply and demand with reference to commodities but by the supply and demand in the case of money and credit.
But there are both long-time and shorter (cyclical) swings in all averages of commodity prices. These are so important in their effects upon business and securities that one must deal with them in business forecasting; and if they can be anticipated, sound forecasts are greatly facilitated. It is the cyclical swings in commodity prices which, partly by affecting inventories, bring profits or losses to business men.
Economic analysis. In view of our inadequate knowledge of the credit factor, both as to theory and practice, it seems best in forecasting general commodity prices to depend chiefly