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Inflation - We have it

Trace its development


Why Inflation?

Trace G. N.P. growth
Current dollar
Rea I

Excessive nature of expansion.

III. Why has expansion been excessive?
Two schools of analysis

Fiscal stimulus

New Economics
Fine tuning
'60 - '64 it worked (apparently)

'64 on it didn't

- why?

Delay in Congressional action
The influence of Monetary policy

Trace rates of expansion
IV. The July I fiscal package

Prior to June heralded as a must

Immediately following enactment

IV (Cont'd.)


Overki 11
Rapid reduction in growth

Predictions of recession
Must keep interest rates down
Housing, etc.
G.N.P. to 10 billion advance -

third quarter

Some of us were skeptical
Bel ief

While excessive Federal spending
coupled with massive budget

deficits generates intense pressure

toward monetary expansion,

Fiscal policy effective as an
economic stabilization influence

only in so far as monetary

management makes it effective.
Commerce estimates raised for 3rd
quarter - 10 to 15 - likely higher
How about 4th quarter? 1st quarter
of 1969?
Money rate of growth may be slowing


Too short a period to tell.
If it is - 1st quarter of '69 might
ease off

If not - strength through 1st

Finally - What do we want?

Accept 5-6-7% inflation to
Hold interest rates low for a time
Hold unemployment at 3 1/2%
Hold business profits high

Or are we willing to accept
Temporary reductions in profits

Increase in unemployment
Higher interest rates for a time.
To my view

We must take the relatively minor
pains of correction if we want
long-run stability, optimum
economic growth, and further

expansion of living standards.