Full text of Statements and Speeches of Karl R. Bopp : Inflation : Notes for talk given to the City Business Club at the Bellevue Stratford Hotel

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

INFLATION: Talk by
Karl R. Bopp to the
City Business Club
Friday, September25
1942, at the Bellevue
Stratford Hotel.

Inflation
Preliminary
Disclaim any official inspiration for this talk.
Bill G l e n

"I do not call them the way I see them I
I oall them as they are. "

Do not know how well acquainted with the field you are
so may repeat some things well known.
Definitions not as important as understanding what is

taking pla ce
Farmer Jone s :

"Is it correct to say, 'A hen is

sitting or 'a hen is setting'?
Farmer Brown:

"When a hen cackles, it is much more
im p o rtan t to k n o w w h eth er sh e
has been laying or lying.

I . Setting of the problem
A.

Winning this war, not inflation, i s the most important
problem today.
Wars are won by the side which puts Into the struggle
the better quality and quantity of resources-human
and m aterial. In o ther w o rds, it is m o ral, lo g istic s, strategy, manpower, and equipment that win.
As a corollary, wars are never lost b
fin
o
s
u
a
c
e
ability to finance them. finance Is important only
i n a s f ar :as It effects the real factors.




B*

Finance does influence the distribution of the costs
of war.
Inflation is a topic of importance because it is
one of the methods of financing a war— or determin­
ing who shall bear the burden*

IX*

Financial requirements of the war*
A*

The amount of funds involved*
1.

Expenditurea by fiscal years*

1942-4 3
1943- U
2*

% 77 billion
100 billion

Rapid growth in monthly expenditures *

March 19*1*•
Maroh 1942**
August 1942*
3*

$0*8 billion
3*1
”
5*2
■

Growth in the public debt.
(In billions)
v
ax±^ ana)

^

Non-market issuas
Market isauts....
Totftl* ••*••*

B*

® bob #
J 1842

J&JL

$24
J>2
$86

+ (8
♦ U
11
7|22
♦ #22

tel

Sources of funds and their significance.
1*

National income*
Chang* alncB
(In billions)

S*p

} & & __________ m o .

II<o

7.1

>9

Total*.•..*•*•
+ t T M + I3A.9
Spendable by
individuals* ** 103*0 +
+ 29*1
let savings by
individuals* ** 24*2 + 11* 5 + 16*5

14*5

2*

Distribution of national, income illustrated*
a*




In terms of goods*

3ttppO#*I

national inoame*...*
Government manta****

Ilia billion
*

Available for
©iviliana*.
b*

♦ 50

Id W n i of mooay.
|il2 hllHfi.
■

Matiottal imoQM*rt««
Oov^.tajea#.. $25
hrtliiiH of
0OT»t»##OUP1UM«
17
Qor*t* portion#..*#.
M m & y available for
eivilianj.......,,*
a« IHaatraiioo of HJm




•

Cl).

13
|70

capa".

Tb* d v l H a * gap.
S w gr rrailahl#..

(toot* available.*
O w i ir sap* ««#•

(2)

|70 bill ion

«

•

mmm.
79* l%l-L5k*lL+ a*r*

• M biUlM
to

J&

$ao

Si
ini*
lr^sifft that
^
Government cloee the
gap
in some way. Doth the ph^ie«U. gap
and the consumer gap can be closed
if civilians invest $20 billion
additional in Government securities*
If they do not, the Government will
have to secure the necessary funds
elsewhere— fro a the banka— And prices
would have to increase 40 par cant
to close the consumer gap*

X.

Inflation.
A.

How «uch have w« had?
1.

2*

Business;
jT
Production (IS)) . . • • • • • * • •
teploym#nt*...................... .
Payrolls*. * • • • * • . ♦ • • . * . . . *
Rrtail t r a d # , , * . ....... ..
Price*:
Wholeaal#.. * . . . * ............
Farm*
Food•
+

52

+ 32
75
+ 11

h!

Retail - cost of living +
Food• • • • « . • . • • . • • • • *
C lo th in g **............
House furnishing#* • *

19
+ 35
+ 25
+21

Hourly factory wage#.**

+32

+ 7

+_____ 6
+ ll
+ 9
+ 4

+
+
♦
+

- 6
+ 23
+
♦ 20

Credit and bankingt
Investment in Goverrmenta.
Hooey in cir<xilation* * * * . *

B*

Sine# Sine# Jan.
1939
A942..+ 73>
+ 10%
+ ^2
*♦' 5
+122
+ 19
+ 54
+ 15

29
75
50
88

Ef1'eot# of uncontrolled inflation.
1*
2*
3*
4*
5*
6*

Impor*ri#h## the middle cla#i*
luinou# to fixed income group*
Endangers endowed institution#.
Dlirupt* trad# and industry*
Ooitly to th# Gcrrenwnt - taxpayer*
Destroy# capital - mumiploymecit, stagnation*
7 . Impair# th# aorala of the people,

C*

Integrated polio/ and program against inflation*
1*

Ineffectiveness of piecemeal approach.

2*

Attack on all bamio front#*







Heavy taxation.

(1)

Congress working on tax bill since
March*

(2)

Majtlman expected

%2J> -

$27 billion.

Control of price* - retail., wholesale, rent**
(1)

(2)

A general maxim* price cel ling i*~
posed to keep cost of living down.
But farm prices and wage rates are
not controlled. Since December 1941Controlied prices*. . . . .

+

2%

Uncontrolled price*,* * *

+

U±%

Stabilisation of wages - wage celling*.
(1)
(2)

So definite policy - a body of prin­
ciple*. Ciiae-by-case method.
The famous "Little Steel* case in
July#
A "Yardstick* - 15% above Jan. 1 ,
19 a *
Two elevator clauses (a)
"Substandard* wages.
(b) * Inequalitie* n of wage®.
3aorifice?

Stabilisation of f a n price* at "parity".
ilV
2)

(3)

Many farm price* above parity#
As food oo*t* go up, labor demands
higher wages.
As waged go up, production oosts go

up.
(4)
(5)

Farmer must pay more for what ha buys.
Hence, a demand for a new and higher
parity#

The chicken and the egg dilemma*
phasing its own tail.

Or a dog

Parity eaase* hlghr wage**
iBlghmr wages aause hlghar parity*

How to atop this upward spiral in the
coat of living?
The far® bloc and the labor bloc*
©•

Rationing of essential scarce commodities.
(1)
(2)

f#

Control of consumer credit.

!1)

2)
(3)
g.

Reduce credit and instalment buying,
encourage debt payments,
Promote savings.

Purchase of Government securities,
(1)

War Savings Bonds -

(2)

monthly rate****** $ 700 million
First 8 mos. 1942*
5,600
*
Other securities - b ills, notes,
bonds.
Taj: savings notes,

(3)
D,

Only a few items - tires, automo­
biles, g as, sugar,
Heed for an over—all program to
avoid inequalities.
How to avoid "black markets•*

Effects of * controlled economy,
1«
2,

3#

Invasion of Individual rights, but this is war.
Controls upset the traditional pattern of
living but * oar stake is great*
Must win victory*
Need for & new mental attitude,
The task call* for " * * , pliancy and resiliency
of mind, for a willingness to discard old
routines and ways of thought, for readiness
to adapt one's self to the unexpected. It
outlaws mental conservatism, it demands the
same kind of self-reliant independence and
readiness to experiment which the frontier
demanded. Upon our ability to d*T«lap and
those traits depends oar national sur­
vival today. That is a part of the challenge




that ooefroatt jx k jt g*e«r*tla«u*
Donald E» l*l*ont Dnlrwriity
of KiMoarl, Jun« 9, 1*U*