White House Press Release

HOLD FOR RELEASE HOLD FOR RELEASE HOLD FOR RELEASE APRIL 9, 1948 CONFIDENTIAL: The following Memorandum to the President by the Council of Economic Advisers, covering the first uarter of 1948, MUST BE HELD IN CONFIDENCE UNTIL RELEASED. NOTE: Release is automatic at 7:00 p.m., E.S.T., today, Friday, April 9, 1948. The same release applies to all newspapers, radio broad- casters and news commentators. PLEASE GUARD AGAINST PREMATURE PUBLICATION OR RADIO ANNOUNCEMENT. CHARLES G. ROSS Secretary to the President MEMORANDUM TO THE PRESIDENT FROM THE COUNCIL OF ECONOMIC ADVISERS The President's Economic Report of January 14, 1948 stressed continued inflationary tendencies as the prime danger to be combatted in early 1948. It recommended maintenance of the existing level of taxation and the tightening of credit controls as restraints upon the general price level, and extension of rent control and initiation of allocation of materials as specific devices for meeting the inflationary dangers. It recommended stand-by controls of prices and wages, to be invoked if crop conditions during 1948, the actual impact of the European Recovery Program as authorized by the Congress, or other economic developments should bring particular inflationary situations NARA to a critical level. These recommendations were made in contemplation of a foreign aid program approximating the $6 billion program enacted by the Congress for the fiscal year 1949. After the passage of three months, we should now examine and evaluate certain important new factors that have entered or old factors that have changed since January and, on this basis, consider what new or modified policies are now called for. The Commodity Price Break and Other Anti-Inflationary Factors One important new factor developed early in the quarter in the form of a sharp break in prices of agricultural products, particularly grains and livestock. The strong inflationary push given to the general price and wage situation during 1947 had, among other things, reflected a condition of poor crop yields in much of the world. In the first half of December 1947, reports of crop conditions both at home and abroad became more favorable, and the January report of the grain carryover was larger than had been expected. This betterment of the food outlook was reflected in considerable fluctuation in agricultural prices, which culminated in a sharp break in late January. From a low about the middle of February there have been several short periods of recovery, but with these prices in the main making a plateau formation somewhat above the bottom point of the dip. In many quarters, the agricultural price break was hailed as the end of inflation. Some even thought it was t beginning of a recessionary movement which would spread throughout the economy. As the Council then reported, however, there were clearly discernible factors which would make such a general movement extremely unlikely. Agricultural prices were not being forced down by any surplus of farm products either at home or abroad and they were not falling into a vacuum. They were declining toward the (OVER)