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' 4 / J Our postwar inflation Is traceable in the first instance to the excessive money supply which we created to finance war* M j u s t m s n t of a peacetime economy to this large money supply almost inevitably would have involved some general price increases* The transition could have been eased by a continuation of direot controlfr— f rationing i'-w J U silu jU A ,vtu X 4 i price controls— -for a period after hbe war until the : supply of goods had been reestablished* But we took off our direct controls and let priees go their own way, which was upward* The Federal Reserve had no wa y to restrain this development* With our huge war-created public debt of sore than a quarter trillion (tellers, the Federal Reserve had to support the Government securities market* Banks and other leaders were free to expand credit by selling Government securities which the Federal Reserve purchased, and this process created additional noney when we already had too much* The Federal Government had a budget surplus for a while, which helped to keep inflationary pressures in check* ta x e s a a d m ade l a r g e c o m m it m e n ts f o r But last spring Congress reduced w o r ld a id and a rm a m e n ts, and th e s e actions have almost eliminated the Government budgetary surplus* We heed under control* bow to do smoothing to bring our monetary inflation Admittedly, the Federal Reserve eould check the inflation by abandoning its support of the Government securities market This would be very strong medicine indeed* Other courses of action should be tried first* Additional authority should be granted to the Federal Reserve System by Congress, s© that the Federal Reserve could o f f s e t tjjae cre d it-e a s in g e f f e c t s ^ u -tX -/ m o f sa les by in s t it u t io n a l h old ers o f Government s e c u r itie s * Higher short-term in te r e s t ra te s are a lso ia p e r a tiv e . Beyond these steps are fundamental measures o f n a tion a l p o lic y . revenues We need to r e s to re a budget surplus by in crea sin g tax decreasing Government expenditures* Obviously Government expenditures cannot be decreased in the present in te rn a tio n a l c r i s i s * C onditions o f in te rn a tio n a l peace have to be esta b lish ed * That i s why ptur fp r iig n p o l ic y i s o f such c r i t i c a l importance with re sp e ct to our dom estic economy at the present time* en force a world peace* We m ist work with our a l l i e s to