One man's misfortune

By

Nelson Bunker Hunt of Dallas is said to have lost something around or over $ 100 million in his venture into the silver market. Market experts say that smaller investors who went into silver late in the story are the ones who need sympathy. Mr. Hunt, they think, can take care of himself.

I do not suppose that it will be any consolation either to Mr. Hunt or to those perhaps more deserving smaller investors to say that their misfortune was a gain for others, but it just might be the best thing that has happened to the American economy in a long time.

Their loss proves one thing. Not all prices are going to go up for all time.

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Silver is a case where prices went up and up until a lot of investors thought there was no end to it. And that assumption applied to other commodities. A lot of prices seemed to have nowhere to go except up. And so people bought on the assumption that whatever they wanted or needed would cost more tomorrow than it costs today.

And that is precisely what causes inflation to get out of hand.

It is called the psychological factor. It is the hardest thing for a government to get a hold on and do something about when that government decides that it must try to bring the inflation under control. It has so far frustrated every effort by three Presidents since the present inflation in the United States first became a dangerous problem.

Richard Nixon tried to deal with it. He even went over to wage and price controls in spite of a strong personal distaste for that device. But he and his advisers underestimated the momentum provided by the "psychological factor." They took the lid off too soon.

Gerald Ford tried to deal with it, and had some moderate success. But he failed to persuade US labor and management that prices might come down instead of continuing to go up. They continued to creep upwards, not alarmingly, but steadily, over his brief presidency.

President Carter has hurled a great deal of rhetoric against inflation, but not until this year has his administration taken the kind of hard steps (boosting interest rates, etc.) which might actually influence the trend. And there is no certainty that high interest rates, a curb on credit card credit, and federal budget cuts would by themselves do the job. People have to be convinced that things they want might become cheaper tomorrow before the psychological factor will be broken and the inflation is finally tamed.

Here is where Mr. Hunt's silver misfortunes just might have a silver lining for the whole community. A lot of investors have been burned by the assumption that prices of commodities will keep on going up. There is certainly a slacking off of panic buying in commodities, in stocks, and now in some patches of the domestic economy.

Housing prices and rentals have started down in a good many markets. New housing starts are way off. They in turn should help convert what has for too long been a seller's market into a buyer's market. Much more of this and it might be possible to get a new house or repairs and modernization on an old one done for less money by waiting than by going ahead today. The builders might have to go around looking for business.

It is already touching the automobile market in that all three major US manufacturers are resorting to cash bonuses, a device for cutting prices without admitting that they are, in order to move their unwanted gas-guzzling monsters. The buyer has influenced the automobile market, even forcing the manufacturers to begin conversion of their production lines to the type of cars which people want.

But still there was needed some dramatic and widely noticed example of prices coming down, hence an advantage to the man who waits before he buys over the man who rushes out to buy. And that example Mr. Hunt has provided by running the price of silver out of all reason. Tiffany & Co. of New York has announced that it has taken 25 percent off the retail prices of "all silverware."

When all retail prices start coming down we will know that the inflation is over. If and when it happens I for one will try to remember to mentally send a little word of thanks to Mr. Hunt.

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