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Show DCSERET September 2, 1969 NEWS, Tuesday, A3 immmy Emmmy, Storw's A7f Em low NEW xORK From steelworker to Wall Street analyst to bank president, Americans are wondering aloud today whether the brakes the government on a runaway economy are generating & reces- Drew Pearson . . . respected, hated sion. The big worry is availability of money, the fuel for economic growth, according to a nationwide survey by United Pres3 International Money is so tight today, says one New York banker, that many corporations delay paying their bills to the last possible moment. They can make more money by lending it on short-terthan by takdiscounts, ing he said. AT&T FEELS IT Even American Telephone & Telegraph Co., the worlds largest in terms of assets, is feeling the money pinch. Southem Bell Telephone & a Telegraph, subsidiary, recently borrowed $150 million and had to pay 8 per cent, the most a Bell company has ever paid. Mortgage money is drying up. If you can get it, the rate is around 8.3 per cent, 3 per cent higher than a few years ago. Installment purchases on appliances and cars, if you can stand the rates, still are Pearson, Columnist, Dies At 71 quick-payin- WASHINGTON (UPI) -Bureaucrats Drew feared Pearson. They worried he would unearth something in their department for which they rightly or wrongly would be blamed. Most of his readers liked him. They considered his d Washington dally Merry-Go-Roun- a journalistic crusade, and the bigger the names Pearson wrote about the better his readers liked it. Most of his fellow journalhim. He was highly controversial and his efforts often drew harsh words from his press cohurls, but they felt generally he accomplished more good than ists respected bad. Pearson, 71, died Monday of a heart attack. His column will be continued by his longtime associate, Jack Anderson. It appears regularly in The Deseret News. 'Anderson, Auto production, while strong for the year, has been falling drastically in the last few months. In short, the money wells are drying up, and it is disturbing Americans, high and low. STEEL STOCKPILING I don't know how a recession can be avoided, said Harry M. Vansach, 39, who works at the Jones & Laughlin Steel Corp. plant in Pitts- burghs south side. Down at the mill, Ive noticed theyve been doing a lot of stockpiling And from past experience I know this usually means bad news for us steelworkers. From all indications, we are now in a slight recessaid Victor Rowsick, sion, vice president of the Iron and Glass Bank in Pittsburgh. "Obviously we are entering a critical phase for the said Monte Goreconomy, don, analyst for Bache & Co., brokerage firm in New York, the countrys second largest Even Herbert Stein,, member of the Presidents Council of Economic Advisers, concedes the risk of recession exists but we dont expect it. HERES THE VILLAIN Galloping . inflation is the villain on the economic scene. For more than 100 consecutive months the U.S. economy has boomed along to historic peaks. Until about four years Pearsons in the said Pearsons ailment had been diagnosed as heart trouble when he was admitted to the Bell-McClur- e Syndicate partner expose-typ- e hospital column Aug. 3. JOINED COL. ALLEN" In 1932, 34, years after he was bom Dec. 13, at Evanston, 111., Pearson joined with Col Robert S. Allen to inaugurate the candid and revealing column which appeared in more than 600 newspapers across the nation and around the world. It had an avid readership ranging from presidents to taxi drivers. I The column barbs were aimed indiscriminately at presidents and other chiefs of Slate as well as congressmen and head of various federal agencies. He was also well known in other countries which he visited and criticized with the same fervor he used, in rapping knuckles at home.' ' President Harry S Truman once called Pearson an s.o.b and President Franklin D. Roosevelt once was quoted as calling him a chror.ic liar. RESULT OF COLUMNS were the Both epithets Jesuit ofi columns. Pearson wrote that Trumans military aide, Maj. Gen. ' ago this translated into prosperity because productivity increased more than three times faster than inflation. In 156b, for instance, the consumer price index, the yardstick of inflation, rose only 1.7 per cent while the rise in real output was 6.3 per cent, In 1966, inflationary forces hit the economy. Prices rose 65 per cent faster than the previous year and, in 1968, they soared 50 per cent over the 1967 levels. So far this year inflation is running at about a 6.5 per cent annual level, well over the rate economists consider dangerous. In terms of the theoretical market basket you filed for $1 on Hirry Hi Vaughan, allegedly used his White House position to his own advantage. .More recent presidents, if tney had any comment about the journalist, did not make them public, Anderson said he talked with Pearson Saturday and the two planned his return to writing the column. He was all set to get bark to work. Anderson said Pearsons Tyler Abel, a Washington lawyer, had taken the columnist for a drive around the farm Monday morning. During the drive Pearson became ill, an ambulance was called and he was taken to the hospital where he died in the emergency room according to a hospital spokesman Im going to miss him more than I possibly can say. I will do my best to carry on the column, Andersen said. Pearson also had a weekly radio and television show. His zeal earned him respect, envy and sometimes outright hale from colleagues or others iu the newspaper profession, as well as in broadcasting. seven-day-a-we- a a son-in-la- $ B 1 Money is scarce and Americans high and are disturbed. Big corporations are borrowing money to tide them over at an interest rate that seemed improbable a few years ago. The little man is affected too. Mortgage money is drying up, and even where available is 3 per cent higher than a few years ago. Interest rates on appliances arid cars are soaring. What is behind this tight money situation? How did it come about? What is the government doing about it and what is the outlook for the future? Dean C. Miller, UPI business editor, answers these and other questions about our disrunaway economy in this timely patch. th would Jau. 1 you would have to spend almost $1.07 on Dec. 3L WIDE EFFECTS In New York, where even semiprivate hospital beds run about $100 per day. Blue Cross is asking for a 43.3 per cent rate increase. Shoe shines on Wall Street run 50 cents without tip. Housing prices have shot through logical ceilings as mortgage money drives up. Housewives in several states have gone on food strikes. What is inflation? Simply put, prices go up or become inflated when the supply of money grows faster than the supply of goods. Beset. by Vietnam, NATO commitments, space rivalry and social unrest, the United States has been spending more money than it takes in. The Federal reserve, its central bank, has in effect printed the money needed to cover deficits in 1967 and 1968. Making the situation even worse, consumers and big fearful of even business, worse inflation, borrow more and more, adding to the infla- tionary spiral. MORE BUT LESS Even though the prime interest rate banks charge pree ferred customers is at an high of 8.5 per cent, it is still cheaper for business to borrow today than in the early 1960s when the rate was all-tim- , only 5 per cent. Again, inflation is the reason. Today it is running around 6 per cent, so the real rate is 2.5 per cent, 1 per cent lower than the real rate in the 1960s. Eight months ago when the situation clearly was getting out of control, the government and the FED applied fiscal and monetary brakes. . The government, which accounts for 20 per cent of the gross national product, committed itself to strict budget cutting to take money out of , about Against this backdrop, President Nixons economic planners are trying to slow down the economy and see only a minimum risk of recession in the effort. They, like the Kpynesian advocates of the John F. Kennedy administration, would have no hesitation about using any fiscal device to head off a recession. If needed, their weapons would be a budget deliberately unbalanced to fixe the economy again, a substantial tax cut to encourage spending and inspire confidence, business incentives such as the 7 per cent investment tax credit Nixon is trying to eliminate, and massive government spending programs on generally acceptable projects such as highways, ghettoes, job training, conservation, beautification, pollution controL This squeezing by the FED has forced commercial banks to raise their prime rate five times since Dec. 2, 1968. It nov; stands at 8.5 per cent, an all-tim- e high. On July 7, Treasury Secretary David M. Kennedy called 24 top bankers to Washington and urged them to hold the line on rates because a credit crunch such as the United States experienced in 1966 had developed With lnany normal sources of money dried up, banks anxious to please at least their prime customers had to go more and more to the Eurodollar market where the present rate is about 11 per cent. Administration officials pointedly note that Nixon, as vice president, called for a tax cut to head off the 1957-5- 8 recession but was vetoed by President Eisenhower. IT COULD HAPPEN Herb Stein, one of the Presidents top economic advisers, says a recession could come about if the business community awakened one day and DRAWS HEAVY RATE Another source is federal or excess money money, . decided suddenly meant business about Nixon stop- ping inflation. But he doesnt believe that will happen. Stein expects business to respond to measures ant bit by bit, not in concert He also thinks the pent-udemand .for housing could blunt any recession. Simply by having the administration ease monetary restraints, there would be a rush to the mortgage window and building contractors, he thinks. The administrations game plan seems to be to brake the economy into a short period of p cent growth, or a siand-ef- f situation. Then, with prices leveling off, ease restraints, slowly and gradually. Hopefully, a steady, orderly, noninflationaiy period would 1 per emerge. Violence Erupts In 4 U.S. Cities By Associated Press Violence eruoted in four American communities overnight leaving one man dead, many injured and buildings burned. .Three of the disturbances had racial undertones. Worst hit was Hartford, Conn., where fires still burned this morning. Police used tear gas - to drive away thieves today after & night of racial violence in the citys mostly Negro North End that left a policeman shot and a mile and half of stores burned or In Dayton, Ohio, police used tear gas early today to break crowd at up a g the Montgomery County Fairgrounds. The mostly Negro mob had begun a march toward downtown Dayton. Fire bombs touched off fires at two business places, police said. Meanwhile, angry groups of whites and Negroes clashed in Parkesburg, Pa., overnight. The violence left a Negro g member of a group shot dead. Eight other peace-makin- were wounded by gunfire in the town of 2,700. Police charged four whites, three of them members of a motorcycle gang, with the murder of Harry Dickinson, 30, a founder of the Parkes-- ' burg Laymen's Actton Council, created two months ago to calm racial tension! . The Parkesburg violence spread to nearby Coatesville after blacks went into the streets there upon hearing of the outbreak in Parkesburg. Negroes , h BasoeiTOSOKou. if yea8! 0 monlSl fQP It $35,000. MINIMUM RISK 1968. one-hal- cost Even worse, mortgage money is virtually nonexistent. Joe has to find a buyer, and the buyer has to find mortgage money to get Joe out of his present home. Joe also has to find a house in the Elmsford area, plus a mortgage. But the tight money plot thickens. Joe is giving up a 5.5 per cent mortgage to take on one at least 8 per cent, And plus point penalties. about that $12,000 profit. Uncle Sam says he must put it into another house and move into it within one year or pay taxes on it. Its 18 months if the house has to be built. And that starts the wheel mortgage spinning again. Banks may obtain additional reserves either by selling U.S Treasury securities to the Federal Reserve banks or borrowing from them. And the major source of additional reserves is Federal Eeeem purchase of government securities. Thus the FED can restrict bank deposits, and indirectly bank credit, by failing to add to its security holdings and limiting credit extension to member banks. It has done this. The FED also regulates interest rates member banks can pay on time and savings deposits. It Ids dune this. MONEY FLEES Recently general money market rates have moved above the maximum rates member banks are allowed to pay corporations for certificates of deposits, a big source of credit money. As a result, about $11 billion dollars of corporation money has fled from the banks into the general money market since late banks have over reserve requirement and will loan to other banks, generally overthe boiling economy. It also But this, too, demands night urged and got a 10 per cent a heavy rate, anywhere from income tax surcharge to inhi6 to 10 per cent, depending on bit consumer spending. the day it is borrowed. CUTBACK EFFORT So far there is no trouble In To come up with a budget getting money for installment buying of cars, appliances or surplus rather than a deficit, vacations. If you can stand the government has withthe rates you can get the drawn troops from Vietnam, said one New York shut down job training camps, money, banker. cut bade on Washington personnel and ordered the mothMany thousands oi college of 100 warships, students may have trouble balling including the battleship New getting school loans this year. Usually government guaranJersey. The Defense Department alone is pledged to trim teed at 7 per cent, such loans loss leaders are at the spending by $3 billion. Since December, the FED banks. But most of them are has been taking money out of taking care of previous customers or children of big cus-- , the economy by making it diftomers. ficult for banks to get it. ComWhen it comes to mortgage mercial bank members of the FED must maintain a fixed money, the little fellow is percentage of their deposits' really in trouble today. In as reserves, and those re- some sections, when money serves must be increased as can be found, the rate is 9 per f is cent Eight and deposits grow. Check-a-Mont- Except that a comparable house in the area desired g possible. STRICKEN AT HOME Pearson was stricken at his Potomac, Md., farm and died shortly after noon at Georgetown University Hospital Funeral services will be private but a memorial service has been scheduled for 11 a.m. EDT Thursday in the National Cathedral A family spokesman said his remains would be cremated and the ashes scattered over his farm. Pearson became famous for his muckraking column start ed 37 years ago. Only Friday he returned home ' from the same hospital after spending 26 days under treatment for what had been announced as bronchial pneumonia. d common. Anybody looking for a new home, even if his old one sells for a handsome profit, is in trouble. HERES EXAMPLE Take a man we must call Joe Doaks who lives near New Brunswick, N.J. and used to work in New York City. Two months ago Joe took a new job in Elmsford, N.Y., on the New York side of the Tappan Zee Bridge in Westchester County. A commute from New Brunswick would be too long and too expensive, so he needed a house nearer Elmsford. His present home, purchased 10 years ago for $18,000, will bring $30,OOC. Pretty nifty profit, you say. Now, for a longer, happier retirement use First Federal's Plan . . . More than 80 were arrested in the Hartford disturbance and. police said that more arrests were still being made. 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Savings Certificates earn from date issued. . INSURED i U tk current rate on INSURED PASSBOOK SAVINGS t Compounded Add to and withdraw from passbook account as you semi-annuall- t wish. is Insured to $15,000. Savings, certificate or passbook accounts, at First Federal are insured to $15,000 by a permanent agency of the U. S. Government. looted. In Fort Lauderdale, Fla., there was a second consecutive night of shooting, looting, fires and rock throwing. Three buildings and two cars were burned, police said. Four policemen and some civilians were injured but hospitals could not provide accurate figures. Fort Lauderdale Sheriff Edward Stack said the disturbances were probably not racial in nature. V ( We've Moved , V x W V to 3711 So. State Volkswagen IntoriKountaia Phono 2626401 v&jm uu and Loan Association Where Thousands Have Saved Millions M. L. Dye, President Main at First Soutli t , i - |