Crossroads

Is inflation ahead for the U.S.? Or a price-lowering recession? The Administration, along with many businessmen, could not agree on a forecast. Secretary of Commerce Charles Sawyer thought the danger was inflation. In a report to President Truman, Sawyer asked that the new Congress extend the waning life of all present business controls (on exports & imports, scarce metals, etc.). He clearly indicated that he would also like some potentially stiffer "standby" controls.

Secretary of the Treasury John Snyder disagreed. At a credit conference in Chicago, Snyder told 1,083 representatives of the American Bankers Association that "business apprehension," which "is getting to be a seasonal affair," had, in effect, already put a damper on overbuying, overborrowing, and overexpansion. There was no need for any additional broad controls against inflation.

This did not mean, he warned, that deflation was ahead. While admitting that the postwar backlog of demand for many items had just about run out, Snyder thought that severe shortages in steel and steel products plus a demand for new products would probably take up the slack that was appearing. The economy, said he, showed "encouraging signs of stability in the vicinity of the present high levels."

The bankers were not convinced, either by Snyder or by Sawyer. In a survey of 310 representative banks, A.B.A. had found that borrowers were becoming slower in their payments, working capital was being absorbed by rising inventories, and demand for loans was dropping. The bankers concluded that the U.S. "may be at an economic crossroads. A turn one way can mean a continued inflationary spiral, a turn the other way can bring a recession."

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