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We believe that Inflation can be stoppeci\ atone In the fight against inflation, but It
and held in check If stops along the lines <Is not enough to do the Job. Its restrictive
outlined below are taken In time by the 1effects cquld be defeated bg an expansion
,J?-5-51
Federal: Government. For theipresant, at. of credit,'and a resultant increase In the.
least, Inflationary pressures c*n be halted money supply, cs well as try the spending
through the uso of Indirect controls without of liquid assets which are now held in very
Fighting Inflation
the need to resort to direct controls such as largelyolume by the American people.
general price and wage ceilings -and rationaction whfch has already been'take?
EXTENSION OF REMARKS
ing. Indirect controls, tf stem enough,' have byThe
the -Government to curb reel-estate and
the great advantage of getting at the heart consume*'credit
or
highly commendable beof the inflationary process wjilch lies In the cause much'of theiscurrent
Inflationary boom
HON. IRVING M. IVES
excesstve^jfcffectlve demand for goods and lies
in
the
housing
durablo-consumer*
services/ *rhey also have the advantage of goods field*. While and
or MKW YOftK
we
do
not llke'.to eee
not InterferfiTig with the freedom ^-of Choice
IN THE SENATE OF THE UNITED STATES ^ t S ^ S S L On the other hand,'direct housing, automobiles, or* any other such
goods denied td <anyone;tt4s'to th^-best inMonday, February 5 (legislative day of controls- deal merely-with the symptoms of terest of all «f Us that'the* Government reMonday, January 29) 11$S1
.inftattort without getting at the basic causes, strictions havft^been put^Into'Teftea.* It la
«*
,, A . .
and fonjihJ#i!f«^ah<mldJ» employed only imperative that' the r€*l~estafe:'apd eon«
Mr. IVES, Mr. President, Iftskunanl- a* a lakt W t < v t h c i u 0 be effective aumer Credit controls be hatched ^carefully
mous consent to have printed In the Ap-,,thoy muatib*
'nowerfui m- in order to insure that theytave 'tha.deeired
restrictive effect, hut lt U net ehspv&h to rely
pendlx o! the. Record* au&tatem^en-f «»rect c o n t r t f v r i 3
titled ''Fighting inflation/' published by» T,MC
^ K E N BY solely on selective credit c o n t r o l * , * ' ' • 4
t h e m e Insurance Association otAmier-l
.
^ • The Federal Reeerve ''Board* ii&xild have
lea. The atntemenfc la AkteA jamiarvl .
basic reason.for the Inflation we have freedom to 'employ its' gcsn$aF credit-conbeen'expetlehblng'irthat our* storey supply trol powers in-order-to exert *ljg Xjnaxfmum
1952... . !
^
r, r A . , f t
haft expanded faster-than.the supply Of goods
in the'd fight agfdp^t^ Inflation*
There being no objection,*, the state- 'and'atfrVfcfca^eo that the 1teyjt6 an'effective Influfnce
Steps which have already been-tak^n by the'
a
well-rounded
flghf^raineitirlsing
prices
is
ment was ordered'to be printed In the
Federal Reserve Board to raise the redJaJ
pregmavby Government directed toward re- count rater and "tttt* efforts: jtfftough^ open-1
Riam»/49[-follows:'
%
ducing
tractive
'money
supply
in
the
hands
market operation!' to^ tighten1 commercial
^ ' '^FlOllTINO IWtATIOW, , ^
of the public.'
, bank credit and thue to bring about a rise In
Since the autumn of 1939 we have been
The volume of bank deposit* and currency
interest rates, have been in the
experiencing a price 'inflation* which has held by the public has risorWrom $<33,300,- short-term
right direction. The same Is true of the
brought about a decline of 43 pcrcent In the 4 000,000 at the end of 1939 to $173,000,000, Treasury's
recent decision to raise* the rate
purchasing-power-of the dollar, with the ^000 at the end of October. 10CO with a on 5-year notes.
The guiding principle here
largest part'of this decline taking place since ! sharp increase of $3,900,000,000 vjpccurring should be that the Federal Reserve must be
ithe end of World War II. This steady depre- { from the end of March throu<itfj -October of permitted to restrict bank credit even
elation In the purchasing power of our mone/j this year. Furthermore, in, recant months though aa a result interest rjites. must rise.
has inflicted hartlchlp and privation on many money has been turning over at a much Neither the Government nor the^ American
'whose incomes are fixed or relatively con- faster rate. . Xhe measures adopted by Gov- people can afford a policy of easy money and
stant, and It has seriously reduced the real ernment, th<%tfoft£i should. r<»tf r*ct not only low Interest rates in a period of strong
value of accumulated savings. The Inflation the current Income of the public, but also Inflation.
which we have already experienced is bad the accumulated money supply. These
Antl-inflationary public-debt manageenough, but with the outbreak of war In measures shoult* include, the ./plowing:
ment: Through public-debt management the
Increased Federal taxation: >The mUlttry- Treasury can and has Influenced the money
Korea ve are suffering an acceleration in the
prcparcdncis program In Its present dimen- supply. Much of the Federal debt issued
upward movement of prices.
Thetyxsiccause of this tlqvelopment Is that sions and all other GovernmerWexpendlture3 during the war and postwar period Is lodged
the demand for goods and cervices by the should be carried on a pay-as-you-go basK In the commercial banks or the Federal ReAmerican people and Government, supported The taxc-4 chosen to raise additional rove turn serve banks w£th the resultant effect of a
by a record-breaking volume of money out- should be geared to cut dlrcftly. Into the greatly expfltitI<*rt.mon*y supply. During the
standing. Is running far ahead of the avail-1 mass purchasing power which hasulven rise next several yearX the Treasury will be faced
. tr,
with heavy refunding of maturing debt, an j
able supply at existing price, leverfr.'' With to inflationary forces. •
A broad extension of excise ta&en, or the Its policy in' managing this debt ahould be
the very high employment of'labbr and other
resources which exists in our economy today, imposition of a general spending .tax, should directed toward getting a substantial part o!
there'is ljttle opportunity {or'a- rapid in- be given carefalv consideration* ;3Chis form the debt out of the banking system Into the
crease In national output'to meet the ex of taxation Is a * w c t deterrent-to spending hands of saverp.
panding requirements of'wflr military-pro- and an cneourKsequmt
saving both be- v The constructive effect of this policy would
gram.4 To an Import aht4<kfcf©*, therefore, ltr cause of the ta* itseU and because of the Ibc to reduceJhb money supply in the hands
is necessary to divert ou*&tfer6utput from1, psychology of It, 5 The Anx, should
b© of the geher^JI ^public. Any new issues of
civilian'
markets to tlW
applicable
such as food and Governme)ft.$4bt' should be placed outsldq
»**»•** jpftftfy*
—/<i j...program,
* - * nlnthini*
»4 to
fVianecensltlcs
mInlmiiim laiml
tM banking.*>atem. In order to accomplish
¥, Trf'fcder to pre-' clothing at the minimum level,
Undef, these cirtri
vent serious lnflatf w* cr&ttktft must com-* A further rise in personal Income taxes, these gojtiMt will be necessary Xor the Treas*
w
h
e
n
ury
to miWjts securities more attractive te
jfeWflg
tftiithtUl
of
the
required.
should
be
levied
across
the
pensate ior the^lai
investors, which means essen«
Government byjrw; tiding odF^mand to the' hoard on a straight percentage increase. all iyp$st
rate on Government securltlea
supply of goods ai L* ^etfylcef^Stitch can be' A sharply graduated incon^e, tax will fail 'tJnlly
eirOB$jA%toj|e-price policy: The Govern*
j^rtt pri& levels,*
short In yielding revenue end will weaken
made'%vailablc
n^Trt;
'through
concerted efforts by Its varl«
"The siTo^iooTiifSldwranc^ wfcicyliolders the Incentive which is needed-for harder
have a .vital stake In Urging upofi i4ii Gov- a n d
efficient work tot increase produc- pus'branches'and by means of appeal tc
ernmentrthat % stiff program be em^lbyed to tion. It shoud not be forgotten that over JpubHc ,cptj}Jon. should strive to prevent
^developments of the wagc-prlc^
flght inflatloV f h l s fclies from the faet thati a Pf'lod of time expanding .production is"farther'
:
an eroslbh ^thVpurchaiing power of the- probably the most effective .way to combat f^iirair ;Thls meatus not only the avoldanci
W
'lirad # salary -Increases designed tc
dollar cut® Ittttf'ifce vifa* of savings which) Inflation.
policyholdersJhfivfraccuiirulated through life: When it becomes, necessary to place a ^fsj-up^wlt^ the cost of living—It alsc
insurance," As a matter of fact,* ot course/ heavier tax burden upon corporations, this t^^jl^the avoidance by business of un?
Inflation exerts aii exceedingly adverse effect' should be done by Increasing the present "^jjriWiled pric4 increases. The varloui
of indirect control urged In thli
upon most savenC but"t| mtist not be' as-' corporate income .tax. An excess-profits tax
suited that inflation wiU affect only accu-. should not be employed because it Is dla- sttr^mimt will fall mdws at the same time
with .the cooperation oj
mulated savings. ^Tbe hStory^o* past li\fla- tinctly inflationary in that it leads to jthi^flbvernnient,
bid mSnegfrment, succeeds in holdlni
tloiis demonstrates clearly that when prices unnecessary corporate exwiWltures and dis- lahot
r,wage»-price spiral.* By the aami
d6wn
f£«
rise at a rapid ratft they generally outstrip courages efficiency and Increased '.produc- foken jti ^be co^trols'urged herein are use<
n
.lncfeasos ,ln Vages- ifnd ualarloi and other tivlty,
*
.
njusih,^ the cause for the wage-prlct
forms of current ir^ctfme^'
I.
• ' / ' - • Reduced Government expenditures: As all iully,
, .
Moreover* ex^erMnce. alio, teaches us the Individuals and business concerns will be splral'w|^, rfembve^,
lesson that every inflationary boom has nitt- called upon to cut their expenditures dras- - c o o ^ i ripif t^ftNToimuAta AJHO^USIHXSS
mately led tot a* collapse^ An economic col- tically, clearly it follows that all nonmllitary
.outlined above can go fai
,lapse would be disastrous*tfl that it* would expenditures by the federal. State, and local towardsfcsntleg-further price inflationr but
play into the hands of the Communist world governments likewise ahould be cut to the iiLtbe,l&*jptiAftfyslatheir success will depem
and would involve Sn itself a serious threat b o n e - This requires, particularly at the Fed- upon a theitmgh understanding by jndlvid<
to our freedom. It is noteworthy that Nikolai «ral level, a searching reexamination of the uala.andteftwlncssof'the forces which glv<
Lenin, the prophet of modem communism. Peacetime functions of Government and the rice to Indavion along with t the measurei
iheld-that debauching the Currency Is the. elimination or pruning of many activities, needed .to (oombatlt.' With .this understand*
best way to destroy a country. 1,
With the additional demandaof our military lng;the American spu|»Ue and* business cat
Alarmed at the rise in prices which got un- program the burden of Government expendl-, «lBl^inted 4ipon,to cooperate wlth*iCdeter<
by Government .elon? thi
der way with the outbreak of war In Korea, turn will be crushing without continuing
Congress acted promptly In passing the De- J® **fry many Items which were put Into limp set 4ortti -here to flght Inflation.nmlvelcmenteof action by Individual!
fense Production Act and in enacting an ™ Federal budget in the postwar period,
lncreasb In personal income taxes. In addl-, Furthermore, although our military program and buslnec* conccrpa in-the flght agalnss
tion, the Federal Reserve Board and the vari-1 » ? s t be sufficiently large to play our proper Inflation ar? clear. Both groups shoulc
ous Government housing agencies-have acted
jn-the preservation of freedom throughqulckly to tighten consumer and real estate
jorld, at the same time rigorous care,
credit. The measures taken so far are com- should W exerted to insure that military
mendable, but they must be broadened and expenditures are- made efficiently and with
strengthened if we-iure to win the battle a minimum of waste.
against inflation.
Tightened monetary and credit controls:
http://fraser.stlouisfed.org/
A nav-as-vou-ao tax nrotrram is th*» cornerFederal Reserve Bank of St. Louis
CONGRESSIONAL RECORD
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