The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
THE NEAR-TERM OUTLOOK
address by KARL R. BOPP
Vice President, Federal Reserve Bank of Philadelphia.
before the
The Credit Men 1s Association of Eastern Pennsylvania
Kugler's, Philadelphia, Pa. - November 18, 1948* 12 BOQfi
INTRODUCTION
1.
Brass hat versus worker
Some of ladies heard Bob Ferguson
2.
Have no communion with burning bush
3.
Text:
"I have been faithful to thee, Cynarm, In w j fashion.”
- Ernest Dovaon
The impression you get depends on where you {dace
the emphasis
I.
Is the boom running out?
A.
Trees don1t grow to the sky, but how close
is closer?
- year 2000
B.
Earlier adjustments
1.
Demobilization, reconversion, reduced
Government expenditures
2*
Sharp break in stock prices - fall 1946
presumed implication for business qfffMlialQKt
3 . Weakness in non-durables first half 1947
many inventories appeared excessive-***7
consumer resistance said to be high
4.
Break in prices of farm products in February
5 . Large Treasury cash surplus first quarter of 1948
6 . Bumper crops this summer
- 2 -
C.
Interpretations of why we rode through these readjustments
1.
2,
D.
Extraordinary strength of inflationary forces
(a
Large backlog demands and liquid assets
(b
Heady availability of credit at low rates
(c
Non-resistant wage policies
(d
Government spending
(e
Foreign demand
Readjustments reflect basic weakness - we have been
saved only by fortuitous shots in the arm
(a
Strategic coal wage increase in summer of 1947
(b
(c
Short c o m crop last fall
Exceptionally large exports in spring of 1947
(d
Cashing veterans1 leave bonds
(e
E.R.P.
(f
Larger defense program
(,
Reduction in personal taxes
At any rate we have had inflation
1939 - October 1943
Consumer prices
Wholesale M
Weekly factojy earnings
Corporate profits (after tax)
Net income of farm propr.
E.
/ 75%
/ 120
/ 126
/ 300
320
Why hasn't more been done about inflation?
1.
Great increase in standard of living
Since 1939
1944
Since 1939 because we are fully employed
Since 1944 because we are producing civilian goods
2*
Increases widely distributed
Not equally - some ^ proportion
of toted but ^ absolutely
Very few, not politically powerful,
have had decreases in real income
3*
Fear of deflation
- 3 -
II• Indications of weakness - the case for early recession
A.
Raymond Rodgers'
1.
"Why Slump?"
Record harvest
detail sales have stopped climbing - '!real" volume
(a)
Household appliances
washing machines
(b)
Men's suits
(c)
Women's wear
(d)
Shoes
(e)
Used cars
Inventories can't go much higher
(a)
Cotton
(b)
Stainless steel
(c)
Hardwood lumber
<d)
Secondary brass and aluminum
(e) Some vegetable oils
B.
4.
Export boom off
5.
I
Housing boom weakening
t S.
Impressive list - reason for pause
Before we are convinced, let us take a systematic look
at expenditure and production prospects
III• Expenditure and production prospects
(Memo)
IV.
Wherein does post-War II differ from I?
A. Public versus private debt
Availability of funds for expansion
B.
Preparedness and armament
Boom superimposed upon restocking boom
C.
Greater concern for full employment
V. Implications for credit men
Orer-all versus shifts
DISTRIBUTION OF GROSS NATIONAL PRODUCT FOR SELECTED PERIODS
(Percentage of total by types of expenditures)
1948,
third
quar
ter
1946,
first
quar
ter
1944
1939
1929
Government purchases of goods and services • 14*7
17.9
45.5
14.4
8.2
8.7
6#1
13.4
4.6
41.9
3.5
5.7
8.7
1.3
6.9
15,2
10.9
3.0
10.0
15.2
5.8
8.4
1.1
3.7
4.5
2.7
1.1
2.5
- .6
4.4
5.1
.5
7.5
6.2
1.5
.3
1.5
- 1.0
1.0
.7
69.8
69.8
52.5
74.6
75.9
9.2
40*2
20.3
6.2
42.2
21.3
3.2
31.8
17.5
7.4
39.0
28.2
9.0
36.4
30.5
100.0
100.0
100.0
100.0
100.0
255.9
196.1
212.2
90.4
103.8
Type of expenditure
Producers1 durable equipment .........
Change in farm and nonfarm inventories .
Net foreign investment.» . . . . . . . . . .
Gross national product, total:
L_.
i_________
Annual Bates
Billions $
GROSS NATIONAL PRODUCT
Annual Batos
Bill! ans 4
@FedFRASER