Free Market in Rubber?

Three months ago, the Combined Rubber Committee, composed of six countries, had the world rubber situation all figured out. The supply of crude rubber, the Committee thought, would not stretch enough to meet demand for a year or two. To prevent prices from soaring, the price of crude was pegged at 23 1/2 -c- a lb., f.o.b. Far Eastern ports. The British Government agreed to buy all Malayan rubber offered at this price. But by last week the pegged price meant little. So much rubber was pouring into Malayan ports that the price was dropping.

On top of this, the Reconstruction Finance Corp. announced that it had made a deal with The Netherlands to buy all the Dutch-produced rubber allocated to the U.S. at 20 1/2 -c- a lb. f.o.b. in the Far East.

In the face of this, the British Government had stopped buying. Rubber was so plentiful that London gossiped that the British Board of Trade was about to restore a free market. If it did, prices might drop even lower, and the British might have to take a whopping loss on the rubber already bought for 23 1/2 -c-. To Wall Streeters the moral was plain: if the price of crude rubber, once among the scarcest of commodities, could drop so quickly, how long would the sky-high prices of other "short" commodities stay up?

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