Inflation Letters

Plucked from every Monday morning's mail on some 20,000 U. S. desks is the Kiplinger Washington Letter, a shrewd, crackling appraisal of current news. It is not, as many suppose, a digest of Capital gossip or confidential "inside stuff." Published and edited by a onetime Associated Press Washington correspondent, the weekly Kiplinger letter is a service for subscribers who are "pretty well fed up on facts. They want evaluation, so that facts fit together and mean something."

Editor Willard Monroe Kiplinger and staff strip the headlines from news, give it perspective, take the political temperature, judge the prospects and possible effects of proposed legislation, estimate the business outlook. Last week in collaboration with his longtime associate, Frederick Shelton, Editor Kiplinger published a paperbound booklet called Inflation Ahead!--What to do about it.*

A series of 25 letters in the manner of the weekly Kiplinger service, the booklet was written before the Supreme Court decision on gold. But in a last-minute review in the inside front cover, Mr. Kiplinger declares: "Things which happen today, like gold clause decisions, are of less importance in the effort to calculate the WHAT and the WHEN of inflation than things which happened months or even years ago."

The what: "Currency or credit? Some of one, some of the other, but not currency inflation on any grand big scale. Probably credit inflation on a really big scale--main thing to watch."

The when: "This year, 1935? The beginnings of it YES. . . . The winter of 1935-36, the spring of 1936--these are the times when a few discerning persons probably will be aware of inflation. . . . Look ahead, 1936 to 1939 or 1940: These four or five years probably will be years of business activity and prosperity. . . . There may be danger ahead in 1939 or 1940--a reaction from the inflation, another depression. Must always figure on this as a possibility."

Two forces are working simultaneously for enormous credit inflation: 1) the business cycle's normal upswing and 2) a Government deliberately and avowedly doing everything in its power to inflate. What is more, it has already succeeded in no small measure. Financing of the Federal deficits by swapping Government bonds for bookkeeping credits has helped raise bank demand deposits $6,000,000,000 in less than two years to almost the all-time 1928 high. Record excess bank reserves of more than $2,000,000,000 provide a base for a credit expansion of $20,000,000,000.

"Inflation," says Mr. Kiplinger, "is like filling a deflated balloon. It doesn't rise until it has reached a certain stage of fullness. Then it tears upward."

That certain stage: "When the volume of industrial production, now in the 80's [Federal Reserve index], reaches 100 and works above this level for several months."

To his own question, "Can you beat inflation?" he replies that there is "no SURE answer." He favors good stocks, lower-grade bonds, real estate ("but be careful"). Commodities he would leave to specialists. And he thinks now is a good time to expand or start a business, particularly a small one.

Tall, baldish, 44, Editor Kiplinger makes no bones about his status as a layman, "not an expert, not an 11th degree economist, not a technician in the upper realms of economic theory." Indeed, he believes his value to businessmen derives from the fact that "he lives and works in the earthly gardens." And in Letter No. 25 he asks that his conclusions and suggestions be challenged, leaving two blank pages for the reader's notes. Probably he will be challenged most frequently not on his conclusions but on his use of the word "inflation." What he has largely in mind is what heretofore has always been politely, if inaccurately, referred to as a "boom." Such a "boom" may be of unprecedented proportions, but the Government has unprecedented powers to control it. Whether it will is another question. "A moderate and reasonable expectation is that there will be control and no runaway inflation of the flight-from-the-dollar variety within the next two or three years. Beyond that it is impossible to see."

* Two publishers who know what to do about it are Richard Leo Simon and Max Lincoln Schuster, who issued Inflation Ahead! at $1. Last summer they snapped up a pamphlet prepared by Briton's Major Lawrence Lee Bazley Angas, published it as The Coming American Boom (TIME, Aug. 27).

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