Notes of Caution

Some quiet notes of caution slipped into the sweet, purring music of U.S. prosperity last week.

One came from Federal Reserve Chairman William McChesney Martin Jr., who was anxiously watching the zooming expenditures for plant expansion, increasing business inventories, the high levels of mortgage and retail credit--all potential inflationary spots in 1956's economy. Yet, said he, there are still some businessmen clamoring for fewer Government credit controls every time "sales do not exceed expectations or fail to set a record." For 1956 the need was for tighter, not looser reins on inflation through the FRB's checks on bank reserves and interest rates. Said Martin: "If it were possible to have good times without controls, then we could go along without change. It is the duty of the Federal Reserve to see that money [is] our servant, not our master."

Another cautionary note came from the automakers, whose production race led 1955's spectacular economy. Traveling to New York to settle final details of the sale of Ford stock, Henry Ford II warned both professionals and amateurs not to expect a surefire bonanza when 10.2 million shares of the stock go on sale Jan. 18.

Said he: "I think some people are indulging in wishful thinking about their chances for fast and fabulous gains. We are businessmen, not miracle men. Of one thing I am reasonably sure: 1956 will not be as good a year as 1955." General Motors' President Harlow H. Curtice, in Manhattan to open G.M.'s 19th Motorama, agreed: while "1956 will be profitable for everyone willing to work to make it profitable," it will inevitably be "the second-best production and sales year in the history of our industry."

As if to drive the warnings home, auto plants around the U.S. were gradually reacting to the slower sales and resultant pile-up of 1956 models. At Ford, G.M. and Chrysler last week, production was cut as much as 10% on some models, and 14,000 workers were laid off the job.

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