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And for the immediate future the business prospects are generally so favorable that there is danger of such feverish and opportunistic activity that our grave postwar problems may be neglected. We need to act now with full regard for pitfalls; we need to act with foresight and balance.
The budget recommendations I shall shortly transmit to the Congress show that we can expect a substantial improvement in our fiscal position over the next few years, as the cost of some of our extraordinary postwar programs declines, and as the Government revenue rises as a result of growth in employment and national income.
But neither the danger of a postwar inflation nor of a subsequent collapse in production and employment is yet overcome. We must base our policies not on unreasoning optimism or pessimism but upon a candid recognition of our objectives and upon a careful analysis of foreseeable trends. Any precise appraisal of the economic outlook at this time is particularly difficult.
We coined the word "stagflation" to describe this. Government's response to these recessions was to pump up the money supply and increase spending. In the last 6 months of 1980, as an example, the money supply increased at the fastest rate in postwar history 13 percent. Inflation remained in double digits, and government spending increased at an annual rate of 17 percent.
But neither the danger of a postwar inflation nor of a subsequent collapse in production and employment is yet overcome. We must base our policies not on unreasoning optimism or pessimism but upon a candid recognition of our objectives and upon a careful analysis of foreseeable trends. Any precise appraisal of the economic outlook at this time is particularly difficult.
Balfour from hastening to counteract misleading impressions current that America would be embarrassed in its postwar foreign policy by becoming involved in European territorial questions, from which, for more than a century, it had remained aloof.
Nineteen Forty-Five provided the common frame of reference the compass points of the postwar era we've relied upon to understand ourselves. And that was our world until now. The events of the year just ended, the Revolution of '89, have been a chain reaction, changes so striking that it marks the beginning of a new era in the world's affairs.
The old-fashioned haphazard system is being abandoned, economics are being applied to ascertain the best adapted unit of land, diversification is being promoted, and scientific methods are being used in production, and business principles in marketing. Agriculture has not fully recovered from postwar depression. The fact is that economic progress never marches forward in a straight line.
Low interest rates will be an important force in promoting the full production and full employment in the postwar period for which we are all striving. Close wartime cooperation between the Treasury Department and the Federal Reserve System has made it possible to finance the most expensive war in history at low and stable rates of interest. This cooperation will continue.
Thus, as the war came to a close and Afro-Americans looked forward to the postwar years with both apprehension and determination, they feared that, with the foreign antagonism eradicated, racist feeling at home might increase. At the same time, they were possessed by a new drive to make American democracy into a reality.
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