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the use of bank credit. Inasmuch as price rises have to be fed 

 either by an Increase in bank credit or greater rapidity of turnover 

 of pocket cash and bank credit, any strict limitation upon the issur- 



ance of bsink credit would tend to prevent inflationary price rises. 



I ■ •' • ' 



However, ^ billion dollars excess reserves would still permit an ex- 

 pansion of about 20 to 30 billion dollars in credit which would be 

 quite inflationary. The chances are that additional efforts will be 

 made to prevent such an expansion in bank credit. 



As indicated in a previous market review, the Federal 

 Reserve System has already fflaced some restrictions upon installment 

 credit. If the time arrives when the federal treasury is unable to 

 finance the armament program by means of taxation and borrowing the 

 savings of individuals, it will have to sell its securities to the 

 banks. If bsink credit then becomes limited in quantity, it may be 

 that pressure will be brought upon the banks to buy more government • 

 securities and issue less credit to commercial concerns or the present 

 restrictions on bank lendings may be eased. 



From the farmers* standpoint these proposed restrictions upon 



1 



the issuance of bank credit would presumably be reflected in smaller 



money payments to individuals than would occur under a very rapid ex- 



■1 

 pansion in bank credit. Farm prices will depend upon the individual's 



income to a major extent and only to a minor extent upon government 



purchases for lease-lend activities. As to the effect of Secretary 



Morgenthau's proposal to restrict profits, that might or might not be 



deflationary. Of course, if profits are not paid out as dividends, 



they can not be spent for farm products or other commodities. However, 



if profits are limited, industries may be less careful about restrict- 



\ 

 ing their costs of operation land may tend to run on a cost-plus basis 



