Evening star. [volume] (Washington, D.C.) 1854-1972, 1948-08-09
Headed for the Wrinqer?

The Republican anti-inflatiOn program
is likely to have little If any perceptible
effect on the cost of living. 1t may tend
to moderate the upward trend and soften
the impact of future deflation but not
much can be expected of it beyond that.
Nevertheless, it is certainly better than
nothing.
AS adopted in the closing hours of the
special session of Congress, the program
calls for a re-imposition of wartime con-
trolls on consumer credit to curb install
ment buying 1t also calls for increases
in bank reserve requirements to put a
check on commercial loans and thus seek
to restrain the inf1ationary presSures
caused by the vast amount of money
available for borrowing on relatively easy
terms The Federal Reserve Board will be
the programs administrator.
The renewal of consumer credit con-
troll will mean that in installment-plan
buying of things like automobiles, re-
frigerators and furniture, Americans will
have to put one-third down and pay of
the balance in shorter period than now.
The change, though 1t will have no
marked influence on prices at this time,
can serve as a wholesome check on people
who are living beyond their incomes and
going into potentially tragic personal debt
because of the temptation to make easy
time purchases they might otherwise
avoid
AS for the banking phase OF the pro-
gram, it authorizes the Federal Reserve
System to order its member banks to
increase their reserves against time
deposits by ~ per cent and against
demand deposits by per cent. This
means that the banks will have to hold
back that much cash from the lending
| field, which in turn means that there will
be less money in circulation and hence
an easing, though a slight one, of the
| infiationary pressures inherent in great
volume of commercial loans at time like
the present.
Conceivably if applied in a drastic
manner, consumer credit control and
| increased bank reserves-both called for
| as part of the Presidents much more
sweeping but Inflated anti-in1ation pro-
gram-could have a serious dedationary
effect. A sharp cut in installment buying,
/
from retailer to manufacturer resulting
in reduced sales, reduced production and
reduced employment Similarly, sudden
and extensive contraction of commercial
loans would come as a blow to new or
expanding businesses in need OF credit
for operating purposes. Neither OF these
dangers, however, seems to be implicit In
the curbs voted by Congress. Thus, IN
the case of bank reserves, the increases
authorized are mild compared to Mr.
Truman's advocacy of Jump of per
cent for time deposits and 10 per cent for
demand deposits.
In terms of his own program, the Presl-
! dent is right in declaring that the
Republicans have resorted to feeble
compromises" His wage, price, ration
| ing, tax and other proposals, however,
would not necessarily have been sound
! AS a matter of fact, many experts, in
| Guiding Mr.. Eccles of the Federal Reserve
Board, have plainly indicated that the
Truman plan probably would have been
no better than the much less ambitious
one finally enacted by Congress.
But to say this is not to suggest that
| Congress has done all that it could have
done or all that it may yet be called upon
! to do to cope with the situation. Our
| imitation is bad, and a dangerous def1a-
tion-a "bust"-may hit us hard one OF
these days unless our economy can be
stabilized by the natural forces of supply
and demand or by measures much firmer
than those advocated by the President or
/ just passed by the Republican majority
In any event, if things keep drifting as
now, this Nation will be lucky to escape
the wringer.