Evening star., 1940-11-17
Price Advances
From Initiation
Still Remote
Post-EIeetion Squirt
Unlikely to Become
Major Movement
Special Dispatch to The Star.

penditures and the unbalanced
Federal budget is still remote. ac-
cording to the Standard Statistics
Co. The brief furry in the COM
modify markets following the
election is unlikely to develop into
major movement.
The Government debt is, of course,
scheduled for a sharp rise during
the next few years as defense
spending far outstrips tax receipts
under even a much sitter tax
schedule than we now have. This
is not news; it has been fore
| shadowed ever since Congress au-
thorized the $4,000, 600 outlays
which represent only the first stages
of the defense program.
Government borrowings noW stand
at around $4,000, 900 900. The
Treasury has leeway for a further
| increase of $1,000 900 900 of borrow
| ing at its discretion and C an
additional $4,000 100000 Of short
term national defense notes. These
limits will probably be reached in
/ l941 Not only is an increase in
/ the borrowing authority needed. but
the Treasury desires to be relieved
of the limitation of its borrowing
beyond s45 900 100000 to short term
issues.
Government Credit Strong.
It is a strange paradox that an
/ imitation scare arising from the
/ prospect of huge Federal borrowing
| should actually find Government
bonds selling at almost the highest
prices on record, and that the first
effect of the scare should be a
| further boosting of these prices.
| Certainly this does not indicate
that the credit of the Government
Is being strained.
Economists have been engaged in
guessing contests for full eight years
attempting to figure how high a debt
the Government can carry before
there is breakdown. During this
period we have more than doubled
the national debt while interest rates
/ have steadily fallen. AT the same
/ time, because private corporate fin
ancing has Jagged there has been a
growing shortage of available high
/ grade investments. Members of the
Federal Reserve System, unable 10
/ find adequate outlets for the invest
ment of capital funds in loans. &C
| tually have upwards of $1,000 900 900
| lying completely idle.
The time TO become fearful of
/ Government credit will not come
until new Treasury security issues
can be sold only through high-pres-
/ sure methods and at rising costs of
! borrowing. Even when that stage is
| reached, as it was reached early in
the last war, the huge gold reserves
provide bulWark against the utterly
uncomfortable type Of currency in
fation which might lead to a COM
/ plete monetary breakdown If the
present initiation scare places any
weight whatsoever on that prospect,
| it is bound to run its course quickly
and collapse of its own accord.
Controls Over Imitation.
| Rising price levels are justified
only when supplies Of essential food
stuffs and raw materials are scarce
and higher prices are needed to
/ bring in new supplies, either by en-
couraging marginal producers to
enter the market, or by encouraging
additional crop planting. or by stim-
| ulating imports. Obviously, the
present situation does not warrant
| fears on that score. at least not yet.
The National Defense Advisory
Commission, which was set up al
most six months ago, does not have
| full powers to control inf1ationary
price moves, but it can exercise a
considerable degree of police au-
thority. Other branches of the Gov
eminent are likewise in position to
take action to prevent unWarranted
price moves. When the defense pro-
gram was inaugurated, the whole
| question of price levels was given
| serious consideration. One member
of the commission was assigned to
this very task, watching price move
ments and policing them.
/ 1t is a foregone conclusion that,
if legislation is needed to prevent an
inf1ationary rise in price levels such
as took place in the last war, such
legislation will be sought by the ad-
ministration and approved by Con-
gress We may be nearer to needing
such legislation than appeared a
short time ago, but if we are, and
additional legislative controls are
sought, the news of that action alone
might halt any inf1ationary upsurge.
Inventories Expanded.
Industry has been expanding its
inventories sharply in recent
months, partly at least as direct
protection against possible sharp
rises in raw materials. Forward Or
ders have been placed on a large
scale to assure the free movement
of the supplies necessary for the
| fabrication of national defense prod
ucts. Industries not receiving de-
fense orders have been protecting
| themselves against possible raw ma
terial priorities. Supplies of essen
tial imported materials have been
built up, both by Government and
private purchases.
Industrial operations have been at
record levels in recent weeks, with
most of the heavy industries at vir-
tually capacity rates. With about
50 500 00O, 900 of national defense
contracts now placed, these indus
tries are assured both of maintaining
present rates and of further expand
ing operations once the new produc-
ton facilities now planned or being
constructed are brought into full op-
Grafton. 1t is evident that further
rise in the composite level of indus
trial production will take place by
the middle of 1941, since much new
capacity will come into operation at
that time.
Real bottlenecks in labor and raw
material supply will certainly not be
reached at once, but only gradually
as the new national defense plants
begin to attain full operations during
the final months of 1941. In some