The Wilmington morning star., 1947-11-22

are responsible for the high cost
of living.
A month ago he himself char
acterized these measures as
those of ''police state" (Which
incidentally they are not) and is
said to have told members of
Congress privately that he
would decline to fix prices. Yet
suddenly, and without consulting
Congress, he is asking Congress
to do something which he knows
Congress will not do and that
he himself is on record as say
ing he would not want them to
do. If this is not partisan politics
in an election year-a device to
make the Republicans refuse
him powers which he does not
wish to exercise-then what is
it?
On the merits, it may be said,
l think, that consumer rationing,
price and wage fixing, could not
cure or even check the initiation
they could only divert the pres
sure from the few controlled
commodities to the much great
er number of uncontrolled com
modities.
If the price ceilings are really
effective-if there is no big
black market - on the. selected
goods that are in short supply,
the effect will be to divert the
inflated purchasing power, and
therefore labor and raw materi-
ais and transportation facilities,
to the uncontrolled sections of
the economy. The result is likely
to be a decline, or. at least no
increase, in til production of
these very commodities that are
in short supply.
The initiation, of which we are
now suffering the consequences,
is due initial]y to the fact that
in financing the war the govern
ment raised about a quarter OF
its funds, not out of taxes and
not out of savings, but by selling
its securities to the commercial
banking system. This bank mon
ey was as purely inflationary as
If it had been flat money turned
out by the government printing
press. At the end of 1945 it rep,
resented the huge sum of ninety
five billion dollars, all of it ex-
cess purchasing power for which
there were no corresponding
goods.
Against this initial inflationary
force, the Treasury took sub
stantial counter-measures. Since
the end of 1915 it has used its
surplus to pay off government
debt held by the banks, and at
the end of June of this year
holdings of government securi-
ties had been reduced by about
10 per cent. This in itself would
have been genuine and effec-
tive means of arresting and even
of reducing the initiation.
But the Treasury's measures
are being offset by the creation
OF new inflationary funds in the
banks. The credits extended by
the banks have risen at rapid
rate. Because of the high re-
serves which they already have
and the large reserves which
they can still acquire from IN
vestors who sell their govern
ment bonds, the country is
threatened with an. increasing
initiation.
The President touched upon
thls-the central problem of the
lnflation-in his first point. But
he did not give it anything like
the emphasis it deserves as can
be seen by the fact that he put
credit controls ahead of the re-
straint of inflationary bank
credit. Yet the expansion of con-
Sc ,W74! T[eWs S! a!p7lo Ieuns
compared with the expansion of
bank credit.
1t is on that problem that our
effort ought to be concentr ated.
Powers need to be given to the
Federal Reserve System to
check the creation of excess
bank credit based upon the ac-
QUESTION of government and