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April 8, 19I42 Chart 1 i s designed to bring out the fact th&t wages and salaries of the people have been increasing rabidly since tne middle of 19Ulj that they have been spending freely to buy goods, but that the output of goods for them to buy h&t not increased. The Increase in production has been concentrated on war supplies* With the growing scarcity of Materials and manpower i t i s likely that the outpot of consumer goods will begin to decline. It i s the pressure of growing incou*e on a shrinking amount of goods that holds the threat of inflation* Chart 2 brings out the fact that salaries and wages constitute a large part of the increase in total national income paid out. It emphasises the need of control of wage and salary increases as a part of the anti-inflationary program. Chart 3 brings out the extraordinary increase in production since the bottom of the 1936 depression* this increase, which has been particularly rapid since the spring of X9kO, has represented principally the production of goods for war purposes* the output of consumer goods, however, also increased until the spring of Chart k shows the very rapid rise in prices, with prices of basic commodities going up most rapidly, wholesale prices of 900 commodities following closely behind, and coat of living lagging, but in recent months showing a more marked advance* Chart 3 compares the course of prices of 1*0 basic commodities during the last war and during the present war up to date* What i t shows i s that up to the present time the course of prices has been surprisingly similar* notwithstanding our greater awareness of the dangers of inflation and the many-sided efforts of combating i t , there i s l i t t l e evidence up to date of better control than prevailed in 1914-17• Chart 6 shows that parallel to the other inflationary developments there is a constant increase in the money supply* Up to date this Increase has been constantly fed by sales of government securit i e s to the banking system* Adoption of a Treasury financing program that would reach non-banking investors to a larger extent than at present Is a necessary part of an anti-inflatlon&ry program* EAG dr The decline for r e t a i l sales in the l a t e s t month shown reflects some reaction from an enormous volume of hoarding in January* WORKERS INCOME COMPARED WITH RETAIL SALES AND PRODUCTION OF NONDURABLE GOODS ADJUSTED FOR SEASONAL VARIATION, 1935-1939 = 100 PER CENT PER CENT 160 160 SALARIES AND WAGES I 50 150 I 40 160 150 140 160 RETAIL SALES OF NONDURABLE GOODS 150 140 140 130 I 50 130 150 i PRODUCTION OF NONDURABLE GOODS I 40 140 I 30 130 JUN. JUN. DEC. 1941 1942 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM INCOME PAYMENTS MONTHLY BILLIONS OF DOLLARS BILLIONS OF DOLLARS 9 8 8 7 7 i TOTAL k S ^ 6 ' 5 \ y / s/\LARIES A AN!D WAGES ^ 4 3 2 AA - i- 1936 1937 1938 1939 1940 1941 1942 BOARD OF GOVERNORS OF THE FEDERAL R WE SYSTEM INDUSTRIAL PRODUCTION PER CENT ADJUSTED FOR SEASONAL VARIATION, 1 9 3 5 - 1 9 3 9 = 100 PER GENT 200 200 80 180 y 160 160 J 140 20 140 20 V 00 100 \ V x/ 80 1936 1937 / 1938 80 1939 1940 1941 1942 THE BOARD OF THE FEDERAL /?*. ERNORS OF RVE SYSTEM COMMODITY PER CENT PRICES AUGUST 1939 * 100 PER CENT 180 180 160 160 140 140 28 BASIC COMMODITIES 120 120 100 100 140 140 120 120 9 0 0 COMMODITIES 100 100 120 120 100 100 1939 1940 1941 1942 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM PRICES OF 4 0 BASIC COMMODITIES PRESENT WAR, JAN.-JUL. 1939=100 WORLD WAR, PER CENT JAN.-JUL. 1914 = 100 PER CENT 280 ~ 280 A 260 260 I 240 I\ I 220 A / A 200 1 I V \ 240 I I I I I 220 1 I I I I V 200 I I I I f 180 WORLD !80 WAR ! I 160 160 140 140 I V 120 120 100 100 80 80 1939 1914 1940 1915 1941 1916 1942 1917 1943 1918 1944 1919 1945 1920 1946 1921 FEDERAL RESERVE INDEXES BASED ON DATA COMPILED BY GENERAL MOTORS CORPORATION AND CORNELL UNIVERSITY. JUNE ESTIMATE BASED ON DATA FOR FIRST WEEK. THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 6 BANK HOLDINGS OF U. S. GOVERNMENT SECURITIES AND DEMAND DEPOSITS AND CURRENCY ALL COMMERCIAL BANKS IN U. S. BILLIONS OF DOLLARS BILLIONS OF DOLLARS 50 50 [ 40 ID D D t 1Q I T 5 Ah iCU RRENC;Y [)E 30 20 / I> 'V yr ^? *•- ^ " / / / / 1/ 1 30 J — 20 r f J / 40 / 10 r W U. S. GOVERNMENT SECURITIES mammmm —^ 1912 14 16 18 '20 '22 '24 '26 '28 '30 '32 '34 '36 '38 '40 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
