Evening star., 1947-12-17
Business Heads Keep
Anxious Eye on U. 5.
Policies on Initiation
Testimony on Methods
Of CurtoiIing Credits
Caused Some Jitters
By David Laurence

businessmen are manifesting con-
siderable anxiety over what policies
the National Government may DUR
sue with reference to initiation.
Recent testimony about means Of
curtailing credit has caused q wave
of the filters to sweep certain Sec
tions OF business and industry de-
pendent on borrowing for their
working capital. A program of
cautionary moves, urging financial
institutions to distinguish for them
selves between productive credit
operations and speculative ones, Is
being formulated for the banks
themselves to put into effect Of their
own volition.
Any tinkering with the delicate
mechanism Of credit is, Of course,
likely to carry with 1t certain haz-
ards, and it Is realized that already
much psychological damage has
been done by the proposals laid be-
fore Congressional committees.
Root Of Worry.
Controls over scarce commodities
are the root cause of most of the
apprehension. Businesses concerned
with such commodities directly or
indirectly are worried about next
years plans. They don't know the
extent to which governmental ac-
tion may 60.
There Is talk, for instance, Of q
revival of the efforts to make an
international agreement on the price
Of wheat. If all wheat growing
countries were to agree to allocate
certain parts of their production and
If the price were fixed for such dis
tribution, considerable progress
could be made toward holding down
food costs in the United States.
Already there are intimations that
the administration, by proposing q
foreign-aid program and a control
program on the domestic side, has
not given full weight to the rela-
tionship Of the two things. The
matter OF controls has become in
volved in party politics, too. 1t may
be that, until Congress takes some
action, there will be more confusion
rather than less about the outlook
for food prices.
Fear More Wage Increases.
Contemporaneously there Is an
undercurrent Of fear about the pos
sible impact Of a third round"
Of wage increases, which could con-
ceivably result in a major disaster
for the nations economy. This is
because prices are already at a high
point and further wage increases
cannot be passed on as others have
been.
All the outcry about high profits
will not erase the fact that the 1947
profits contain mark-ups In inven-
tory and do not always reflect real
profits. Hence any substantial in
crease in fixed expenses on the part
Of business will not be offset by
these inventory profits. Companies
which have q book profit due to the
mark-up Of the prices Of their in
ventories will have to replace inven-
tories with goods at prevailing
prices, 50 this does not represent
any actual gain in the long run.
Spokesmen for the radical groups |
have been trying to force n third
round" of wage increases on the
ground that large profits have been
made. The problem of absorbing
cost increases, on the other hand, Is
becoming so serious that deflation
may set in during 1948. Mistaken
labor strategy could force depres-
sion on the country.
Some Favor Deflation.
There seems to be tendency In
some administration quarters to
bring about a deflation, whereas in
other quarters it is desired to keep
the initiation boom going at least
until after election.
On Capitol Hill there Is not much
eagerness to put through anything
but the voluntary control program
because of a belief that break In
prices will be coming perhaps in
the first quarter of 1948. The idea
that the initiation boom may have
run It's course and that the year
1948 will be year OF attempted
sterilization Is gaining ground
hereabouts.
There is, OF course, large pent-
up demand for SO many things that
certain industries will. not feel any
readjustment. 1t is because the
situation is so variable that Con-
gress is reluctant to put into effect
blanket controls sure to affect busi-
nesses that ought to keep on pro-
ducing as well as businesses that
need to be restrained from undue
expansion or speculative operations.
1t is always difficult to know where
to draw the line ami all that can
he said at the nonent is that The
politicians are not helping the situ-
alton by their naneuverS that create
more and more anxiety.
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