Now that prices have risen even to an inflationary level, it 

 would be detrimental to the war effort to force prices downward. We 

 have many brilliant economists in Washington who, if they are not loaded 

 down with administrative details, can see the advantages of planning for 

 stable prices and can see the disadvantages of either inflationary or 

 speculative rises in prices or deflationary declines in prices. Both 

 are very disturbing and work hardships upon some class of the population. 

 Although deflationary steps would be less painful during a period of 

 maximum production such as the present than during postwar periods when 

 there is a great deal of industrial unemployment caused by the change- 

 over from the production of armaments to the production of civilian goods, 

 it is very doubtful if any further steps will be taken which would have 

 the effect of lowering prices of farm products. Rather, I should expect 

 to see farm products v/hich are far below the pai^lty or celling levels 

 approach those levels. 



The principal factor which leads one to ex:oect higher rather 

 than lov/er prices is the maintenance of the present level or possible 

 increase in the level of incomes associated with a very great decline 

 in the quantity of goods and services available for consumers to purchase. 

 Local stores indicate that they exi^eot their volume of merchandise sales 

 to decline to the 1932 level, not because there is no purchasing power, 

 but because they can not get goods to replenish sold-out stocks. Jewelers 

 say they can sell all their present stocks of watches during the current 

 graduation period and next Christmas, but that they can not replenish 

 their stocks so that they 5ire really selling themselves out of business* 

 On the other hand, the banking system expects an expansion of bank 

 credit which is the same thing- as saying an expansion in consumer income. 

 Bankers have already approached officials of the Boa^d of Governors of 

 the Federal Reserve System in connection with the need for lowering 

 reserve requirements in order that the banks can expand loans. It was 



