Regional President Speech

THE NEAR-TERM OUTLOOK address by KARL R. BOPP Vice President, Federal Reserve Bank of Philadelphia. before the The Credit Men1 s Association of Eastern Pennsylvania Kugler's, Philadelphia, Pa. - November 18, 1948* 12 BOQfi INTRODUCTION 1. Brass hat versus worker Some of ladies heard Bob Ferguson 2. Have no communion with burning bush 3. Text: "I have been faithful to thee, Cynarm, In wj fashion.” - Ernest Dovaon The impression you get depends on where you {dace the emphasis I. Is the boom running out? A. Trees don1t grow to the sky, but how close is closer? - year 2000 B. Earlier adjustments 1. Demobilization, reconversion, reduced Government expenditures 2* Sharp break in stock prices - fall 1946 presumed implication for business qfffMlialQKt 3. Weakness in non-durables first half 1947 many inventories appeared excessive-***7 consumer resistance said to be high 4. Break in prices of farm products in February 5. Large Treasury cash surplus first quarter of 1948 6. Bumper crops this summer Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 2 - C. Interpretations of why we rode through these readjustments 1. Extraordinary strength of inflationary forces (a Large backlog demands and liquid assets (b Heady availability of credit at low rates (c Non-resistant wage policies (d Government spending (e Foreign demand 2, Readjustments reflect basic weakness - we have been saved only by fortuitous shots in the arm (a Strategic coal wage increase in summer of 1947 (b Short com crop last fall (c Exceptionally large exports in spring of 1947 (d Cashing veterans1 leave bonds (e E.R.P. (f Larger defense program (, Reduction in personal taxes D. At any rate we have had inflation 1939 - October 1943 Consumer prices / 75% Wholesale M / 120 Weekly factojy earnings / 126 Corporate profits (after tax) / 300 Net income of farm propr. 320 E. Why hasn't more been done about inflation? 1. Great increase in standard of living Since 1939 1944 Since 1939 because we are fully employed Since 1944 because we are producing civilian goods 2* Increases widely distributed Not equally - some ^ proportion of toted but ^ absolutely Very few, not politically powerful, have had decreases in real income 3* Fear of deflation Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 3 - II• Indications of weakness - the case for early recession A. Raymond Rodgers' "Why Slump?" 1. Record harvest detail sales have stopped climbing - '!real" volume (a) Household appliances washing machines (b) Men's suits (c) Women's wear (d) Shoes (e) Used cars Inventories can't go much higher (a) Cotton (b) Stainless steel (c) Hardwood lumber <d) Secondary brass and aluminum (e) Some vegetable oils 4. Export boom off 5. Housing boom weakening I t S. B. Impressive list - reason for pause Before we are convinced, let us take a systematic look at expenditure and production prospects III• Expenditure and production prospects (Memo) IV. Wherein does post-War II differ from I? A. Public versus private debt Availability of funds for expansion B. Preparedness and armament Boom superimposed upon restocking boom C. Greater concern for full employment V. Implications for credit men Digitized for FRASER Orer-all versus shifts http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis DISTRIBUTION OF GROSS NATIONAL PRODUCT FOR SELECTED PERIODS (Percentage of total by types of expenditures) 1948, 1946, third first Type of expenditure 1944 1939 1929 quar­ quar­ ter ter Government purchases of goods and services • 14*7 17.9 45.5 14.4 8.2 8.7 13.4 41.9 5.7 1.3 6#1 4.6 3.5 8.7 6.9 15,2 10.9 3.0 10.0 15.2 5.8 3.7 1.1 4.4 7.5 Producers1 durable equipment ......... 8.4 4.5 2.5 5.1 6.2 Change in farm and nonfarm inventories . 1.1 2.7 - .6 .5 1.5 Net foreign investment.» . . . . . . . . . . .3 1.5 - 1.0 1.0 .7 69.8 69.8 52.5 74.6 75.9 9.2 6.2 3.2 7.4 9.0 40*2 42.2 31.8 39.0 36.4 20.3 21.3 17.5 28.2 30.5 Gross national product, total: 100.0 100.0 100.0 100.0 100.0 255.9 196.1 212.2 90.4 103.8 L_. i_________ Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis GROSS NATIONAL PRODUCT Annual Bates Annual Batos Billions $ Bill! ans 4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Karl R. Bopp (1948, November 17). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19481118_karl_r_bopp

@misc{wtfs_regional_speeche_19481118_karl_r_bopp,
  author = {Karl R. Bopp},
  title = {Regional President Speech},
  year = {1948},
  month = {Nov},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19481118_karl_r_bopp},
  note = {Retrieved via When the Fed Speaks corpus}
}