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Show Page 4 UTAH FARM BUREAU June, 1966 NEWS (continued from Page 2) THE NATURE OF INFLATION 7bon or GOVERNMENT PRICE CONTROLS ON FARM COMMODITIES actually air or gas. If the means to increase the size of an object with term inflation is applied to economics, it means an increase in the supply of money. The increase in the supply of money doesn't necessarily bring on higher prices and higher costs of living. These factors depend on what people do with their money. ly to begin to depress farm prices. Government planners have for some time been able to exercise virtually complete control over such commodities as wheat, feed grains, and cotton. Price supports and controls in many commodities made it easy to 1 keep prices where they wanted them. If wheat prices were beginning to move higher, it was simple to sell large quantities of CCC wheat and depress the market within hours. But at the beginning of the year they aimed at other commodities not under control programs. WHO CAUSES INFLATION? len Wallace, a distinguished economist who is now president of the University of Rochester, 'Inflation can be generated only by the government,' he said. 'Business firms, labor unions, or consumers with excessive market power can do many objectionable things that are contrary to the public interest; but one objectionable thing they cannot do is to cause inflation or, for that matter, As prevent it government spending increases, more money is fed into the economy. This new money often shows up in the form of higher wages and increased consumer spending a vicious cycle that cuts into the purchasing power of the dollar." "Only government can cause inflation PORK PRICES UNDER ATTACK k of defense pork Department directive ordered a domestic No 50 news was released on the move. per cent purchases by For more than a month the public was unaware of the action. During the same period the President urged housewives to refrain from buying those commodities which were a little "high." Pork producers who had finally gotten production into line with demand so that prices were beginning to improve, were undercut-bac- "As wages increase, more money is avail- able' for purchasing goods and services. When these goods and services are in short supply, prices go up. As prices go up your dollar won't buy as much as it used to. This fact in itself, makes many people buy quickly to get 'their dollar's worth'. This is since their action pushes the cycle damaging the dollar even more. The following is the sad record of tfye decline of the purchasing power of the dollar: standably angry." self-defeati-ng Fiscal Year 1939 1940 ' 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 Value of dollar 100 cents 92.0 94.4 95.3 80.3 79.0 80.3 79.0 77.2 71.1 58.3 57.8 53.5 52.3 51.9 51.7 51.9 51.1 1957 49.4 1958 1959 1960 48.1 1961 47.7 46.9 46.4 45.9 45.4 44.8 43.9 (est.) 1962 1963 1964 1965 At this rate the 1939 dollar will become a nickel by 1985! "The dollar loses value every year" "On (continued on Page 5) "Inflationary spending hurts your savings" "Not only does the val- WHAT ABOUT SAVINGS? ue of the dollar you spend today decrease, the value of the money you put away for the future, decreases evem more rapidly. A one per cent price rise cuts 'real' income erf the average worker $52 a year. At two per cent, the cut in 'real' income is $102 and so on up. Overall, a one per cent rise in prices takes 5.6 billions in buying power. A two per cent rise pushes that erosion up to 11 billions, and so on up. And significantly, people hold 1.4 trillion dollars- - in finnnrial assets. These assets tend to shrink in real value as prices move higher. A one per cent rise cuts buying power of savings by 14 billions. A two per cent rise cuts buying power of peoples' savings by 27 billions. A three per cent rise means a cut of 4 1 billions, and so on." "The real culprit is government spending, which has increased from $76.5 billion in fiscal year 1960 to an estimated $163 billion for fiscal 1967. The only real cure for inflation is to curb government spending. Price and wage ceilings, and appeals to labor and management to exercise restraint, cannot stop inflation because they ignore the real cause of the problem. While it may be possible to keep prices down for a while through controls or political pressures, the result will be to distort production patterns and increase the pressure for other prices to THE REAL CULPRIT rise." Novem- ber 23, 1965 the USDA announced that it would sell Hard Red Spring wheat of 15 per cent protein and above and Hard Red Winter wheat of 13 per cent protein and above 'at market prices but not below 108 per cent of the current support price plus carrying charges.' In explaining this action the Department said '. . . the 1965 wheat crop is somewhat lower than averc farmers earn can't "Why age in protein content As a result, higher quality bread wheat is attracting abnormally high market premiums premium for their wheat?" which could be reflected in higher flour and bread prices.' 1 QUESTION. : If growers produced less high quality protein wheat than usual in 1965, why shouldn't they be allowed to receive a premium for it? The continuing action to hold down wheat prices has an underlying motive. Secretary Freeman sums it up: ". . . But there is another overriding responsibility in connection with the grain program to keep them operating so there will be a fair price to the producer and effectively at minimum cost to the taxpayer. And this we cannot do if we are required to hold our stocks off the market for prices so far above loan levels that we can't get farmers into the voluntary program.' " "Government is the real culprit" |