Economic Information for Indiana Farmers, no. 12 (Jul. 1942) |
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ECONOMIC INFORMATION No. 12 FOR INDIANA FARMERS July, 1942 THE PRICE SITUATION National economic policies to control prices may slow down the rise in farm prices during the next few months but they are expected to become less effective as the war progresses, due to an accumulation of inflationary influences. The government likely will continue to use its power to encourage production of things needed most, including certain agricultural products. In adjusting their farm businesses to war conditions, Indiana farmers will find it to their economic advantage as well as to the national interest to pursue a vigorous production program, taking into account price relationships that will exist under a partially effective program of price control. Prices Have Increased Substantially During Present War Between the outbreak of war in September, 1939, and April. 1942, prices of basic raw materials rose 66 p:rc:nt, wholesale prices advanced 31 percent, and the cost of living increased 14 percent. During this same period U. S. farm-product prices increased 70 percent. Prices increased rapidly starting in the early part of 1941. Why Prices Rise During a War Prices rise during a war principal'v because consumers have an increasing quantity of money to spend for a decl'ning quant ty of goods. No nation ever waged a major war without a substantial reduct on from its peace-time standard of living. The national income of consumers was 71 billion dollars in 1939. 76 billion in 1940, 92 billion in 1941 and it is estimated that it will be a.bout 117 billion dollars in 1042. Kuge war expenditures by the government and a higher price level account largely for the record breaking na ional income anticipated th!s year. Of this amount it is estimated that approximately 31 b 11 on dollars will be taken for taxes and individual ravings, leaving S6 bdlion dollars of morcv income. But at present prices only about 69 billion dol'ars worh of goods w 11 b* available for purchase by civil ars, bavin"; 17 billion dollars excess purchasing pow^r —the "inflationary gap.'' With this excess available to civilians for use in bidding against one another for the goods available, an inflationary rise in the price level of at least 25 percent could be expected. Some Consequences of Inflation Severe inflation causes reckless buying and hoarding of goods in expectation of further advances in prices. This increases ihe violence of the price rise. People fail to use reasonable business caution. Th?y borrow unduly and ignore details of thrift. Speculation in goods is encouraged. Money incomes of various economic groups are affected differently. Salaried persors and these engaged in the professions do not receive increases promptly. Neither do individuals or institutions that depend on fixed incomes. In the past, severe inflation has always occurred during major wars and increased the money costs of the wars. But the most far-reaching consequence of inflation is that it sets the stage for a deflation extending over a period of years. All of the effects of inflation are not injurious. Some are beneficial. Certain types of production are increased. Essential industries are stimulated while non-essential industries are curtailed. Labor is attracted to essential industries where pay is highest.
Object Description
Title | Economic Information for Indiana Farmers, no. 12 (Jul. 1942) |
Purdue Identification Number | UA14-13-econ194207 |
Date of Original | 1942 |
Publisher | Purdue University. Agricultural Extension Service |
Subjects (LCSH) |
Farm produce--Indiana--Marketing Agriculture--Economic aspects--Indiana |
Genre | Periodical |
Collection Title | Extension Economic & Marketing Information (Purdue University. Agricultural Extension) |
Rights | Copyright Purdue University. All rights reserved. |
Coverage | United States - Indiana |
Type | text |
Format | JP2 |
Language | eng |
Repository | Purdue University Libraries |
Date Digitized | 02/26/2015 |
Digitization Specifications | Original scanned at 400 ppi on a BookEye 3 scanner using Opus software. Display images generated in Contentdm as JP2000s; file format for archival copy is uncompressed TIF format. |
URI | UA14-13-econ194207.tif |
Description
Title | Economic Information for Indiana Farmers, no. 12 (Jul. 1942) |
Purdue Identification Number | UA14-13-econ194207 |
Transcript | ECONOMIC INFORMATION No. 12 FOR INDIANA FARMERS July, 1942 THE PRICE SITUATION National economic policies to control prices may slow down the rise in farm prices during the next few months but they are expected to become less effective as the war progresses, due to an accumulation of inflationary influences. The government likely will continue to use its power to encourage production of things needed most, including certain agricultural products. In adjusting their farm businesses to war conditions, Indiana farmers will find it to their economic advantage as well as to the national interest to pursue a vigorous production program, taking into account price relationships that will exist under a partially effective program of price control. Prices Have Increased Substantially During Present War Between the outbreak of war in September, 1939, and April. 1942, prices of basic raw materials rose 66 p:rc:nt, wholesale prices advanced 31 percent, and the cost of living increased 14 percent. During this same period U. S. farm-product prices increased 70 percent. Prices increased rapidly starting in the early part of 1941. Why Prices Rise During a War Prices rise during a war principal'v because consumers have an increasing quantity of money to spend for a decl'ning quant ty of goods. No nation ever waged a major war without a substantial reduct on from its peace-time standard of living. The national income of consumers was 71 billion dollars in 1939. 76 billion in 1940, 92 billion in 1941 and it is estimated that it will be a.bout 117 billion dollars in 1042. Kuge war expenditures by the government and a higher price level account largely for the record breaking na ional income anticipated th!s year. Of this amount it is estimated that approximately 31 b 11 on dollars will be taken for taxes and individual ravings, leaving S6 bdlion dollars of morcv income. But at present prices only about 69 billion dol'ars worh of goods w 11 b* available for purchase by civil ars, bavin"; 17 billion dollars excess purchasing pow^r —the "inflationary gap.'' With this excess available to civilians for use in bidding against one another for the goods available, an inflationary rise in the price level of at least 25 percent could be expected. Some Consequences of Inflation Severe inflation causes reckless buying and hoarding of goods in expectation of further advances in prices. This increases ihe violence of the price rise. People fail to use reasonable business caution. Th?y borrow unduly and ignore details of thrift. Speculation in goods is encouraged. Money incomes of various economic groups are affected differently. Salaried persors and these engaged in the professions do not receive increases promptly. Neither do individuals or institutions that depend on fixed incomes. In the past, severe inflation has always occurred during major wars and increased the money costs of the wars. But the most far-reaching consequence of inflation is that it sets the stage for a deflation extending over a period of years. All of the effects of inflation are not injurious. Some are beneficial. Certain types of production are increased. Essential industries are stimulated while non-essential industries are curtailed. Labor is attracted to essential industries where pay is highest. |
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