Masonry Magazine April 1970 Page. 29
Washington Wire
(Continued from page 22) there is a dire need to get more money for depressed home-building.
So the money supply is being allowed to grow once again at a modest rate-one that will encourage the cautious late-year business pickup that is desired. But it is hoped that the new expansion will not prove great enough to rekindle inflation.
INTEREST RATES ARE NOW SLIPPING. The slide started with yields on bonds and similar securities. These usually lead rates in a new direction. And now the prime rate-which banks charge their biggest and best customers and to which most other money rates are scaled-has also been cut from 85%.
This does not mean that money is now getting downright easy to borrow. With the supply growing only moderately, banks will continue to ration credit to applicants. Mortgage rates will edge down very slightly during 1970. They always lag.
PARADOXICALLY, INFLATION REMAINS A THREAT, despite recession fears. Excess demand for goods and services the root cause of inflation-has been eliminated. That was what tight money and the tight Budget were aiming at. But dangerous inflationary psychology still lurks just beneath the surface, ready to spring forth at the slightest encouragement. Those ambitious plans to expand plant reflect a persistent belief that costs will not stop rising. (Many firms figure that construction and machinery costs go up 1% a month.)
Some officials fear that freeing even a few Federal grants would lead business to think Nixon is chucking the fight on inflation. They hope this won't spur renewed expansion, but are keeping their fingers crossed. They would tighten money fast, if business again began making inflationary decisions.
ECONOMISTS SEE A GLINT OF HOPE OF LESSENING INFLATION in some trends just beginning to emerge. There is softness in some previously strong areas. The nonferrous metals, which went up 20% in 1969, are drifting down now-nickel lead... tin. and zinc. Aluminum supply is in balance with demand. Some food prices have already begun to drop, after last year's big increases. Fruits, vegetables, and eggs have come down-sharply, in certain instances. And cattle marketings are slated to go up this spring, trimming beef prices.
There is a growing feeling that prices may fall as much as economists at the White House have been predicting -from a rate of 5% a year to about 35% to 4%, Until just recently, the prevailing view had been that such progress is unlikely.
THE FLOOR FOR WAGE INCREASES MAY GO AS HIGH AS 10% a year in months ahead. That's the sobering forecast of some government labor experts. The unions are under intense rank-and-file pressure to make up
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