a stimulation of inflation in other countries throughout the world rather than prosperity in those countries?

Mr. JOHNSTON. Oh, that is absolutely true. It goes, for instance, in the rubber—————

Senator BENTON. It isn't as if the farmers are getting the money. Mr. JOHNSTON. It goes to a few extra people. It enormously increases the wealth of a few.

Senator BENTON. It gives as a heritage inflation and not prosperity. Senator MOODY. Mr. Chairman, I believe Mr. Johnston indicated he wanted to answer my question.

Mr. JOHNSTON. Yes: we are trying to do something about it. First we want to get the allocation of these raw materials by the rawmaterial-producing countries, a fair allocation to the United States at a reasonable price.

We are now working on that on rubber, trying to get a fair allocation at a reasonable price over a protracted period of time.

There has been some indication that certain raw-producing countries did not want to do that in the past, but I think more of them are willing to do it now than they were in the past.

Furthermore, we may have to come to the point-and I say this to you without any knowledge that we will do so, but personally, I would be in favor of coming to the point-if we can't get a fair allocation from these other countries at a reasonable price, I would be in favo of buying up those raw materials which we furnish to the rest of the world, and furnishing them at a price which was commensurate with what we are paying these other countries for the raw materials we are buying from them.

Senator MOODY. Can you tell us some of the people who are reluc tant to cooperate?

Mr. JOHNSTON. I think they are all of them much more desirous of cooperating now than they were a little while ago. I don't want to mention names, if you don't mind.

Senator CAPEHART. What happened to change their minds?

Mr. JOHNSTON. I think we got a little tough over here. And I think we have some aces in our hand, too, Senator; we are not devoid of all cards.

Senator BRICKER. You are rather late in using them.

Mr. JOHNSTON. Better late than never.

Senator BENTON. Their governments have moved in on them, too. We were dealing, to a large extent, with private individuals, and are now dealing more and more with governments.

Mr. JOHNSTON. And I think there is a much greater realization of the problem on the part of the governments involved, and even individuals.

I have heard wool growers of Australia complain recently about the high price of wool, because it is forcing substitutes in the market which will injure them seriously at some future date.

Senator BRICKER. It may ultimately destroy it.

Mr. JOHNSTON. That is right.

Now to get back to this chart-this is the import spot market prices. The domestic spot market prices have not gone up as high, and have come down also since the price freeze.

The CHAIRMAN. You have no recommendation as to that? Is there any subsidy on there, except minerals?

Mr. JOHNSTON. Yes; there are subsidies on minerals, metals, and other raw materials authorized in the present law, and we are asking for broader authority. There is a general differential subsidy authority provided for in our proposed amendments, and also there is the proposal for margin control of the commodity exchanges which would have an effect upon the domestic spot market prices.

The CHAIRMAN. Well, now, in the case of the subsidies, the Secretary of the Interior testified about that here yesterday; practically all minerals and mines, or have you all got anything else in mind? Mr. JOHNSTON. There is a differential subsidy.

Mr. JOHNSON. Might I explain that? The case I know of where the differential subsidy authority might be used besides the mines and minerals field would be in the case of the nonprocessing slaugh

terers.

Now, there may be others as well.

The CHAIRMAN. In other words, you think because you roll the price of meat back you are going to have to subsidize it?

Mr. JOHNSON. Whatever the controlled situation on meat might be, as I understood it, you would still have difficulty in providing a situation where your small nonprocessing slaughterers could live.

The CHAIRMAN. In other words, to keep them on the line with Armour, Swift, and so on?

Mr. JOHNSON. That is right.

Mr. JOHNSTON. I also want to call to your attention that the weekly wholesale price level has held remarkably well since the price-wage freeze, and is very little higher than it was at the time of the pricewage freeze and has held steady for the past 11 or 12 weeks.

Consumer prices went up, took another spurt after the Chinese intervention, and this line [indicating] has now leveled off pretty much.

The CHAIRMAN. Do you have a recommendation in this bill?
Mr. JOHNSTON. No, sir.

Senator BENTON. Have you seen the presentation of Mr. Keyserling, the charts and presentation made by Mr. Keyserling to this committee? Mr. JOHNSTON. I haven't seen them; no, sir.

Senator BENTON. His whole presentation was to the effect that unless we put the high taxes in immediately, and do many other things, that this leveling off here is just temporary.

Mr. JOHNSTON. Oh; I think that is true.

Senator BENTON. I don't wish to draw the wrong impression or implication from your chart.

Mr. JOHNSTON. Oh, no.

Senator BENTON. It is a temporary wave in a rapid incline? Mr. JOHNSTON. It is a temporary recession because of large inventories, and because the defense spending hasn't taken hold yet.

Senator CAPEHART. How can you say that when you are controlling prices? How can you say they are going up?

Mr. JOHNSTON. I didn't say they were going to go up; I said the pressures are going to be terrific for the increase in prices. We are going to try to hold them.

Senator BENTON. He says unless we do certain things

The CHAIRMAN. That is true, but

Senator CAPEHART. Whether you do anything or not, i

ston holds the price, that is the price; isn't it?

John

Senator MOODY. It will certainly go faster if you don't have controls than if you do.

The CHAIRMAN. Senator Benton brought up the question Mr. Keyserling raised as to taxes. That is the question we will have to deal with. This committee has nothing to do with passing the tax bill. I didn't want the record to get cluttered up on what new legislation we should pass in regard to taxes.

Senator SCHOEPPEL. Mr. Chairman, I would like to ask Mr. Johnston a question: Did I understand you to say something about the controls of the commodity market; speculative markets?

Mr. JOHNSTON. Yes; we would like to have authority lodged in the Government to control margin requirements in the speculative market.

Senator SCHOEPPEL. Mr. Martin, when he appeared before this committee, said that would have very little if any influence on what is happening to consumer prices. I am slightly less than confused here.

And he formerly headed the New York Stock Exchange.

Mr. JOHNSTON. Of course, you have that control of the New York Stock Exchange, as you know.

The CHAIRMAN. Well, you have control of the commodity exchanges if the Secretary of Agriculture wants to use them. He can close any exchange he wants to, through the President.

Mr. JOHNSTON. He may close it, but I don't think he has control——— The CHAIRMAN. He can peg the price of cotton or wheat tomorrow morning, as Mr. DiSalle did with cotton in February and March, and March cotton was never traded in again.

You have authority to do that now.

Mr. JOHNSTON. But, Senator, you can't set margins, and that is what we are requesting.

The CHAIRMAN. If you can't trade

Mr. JOHNSTON. We want you to trade.

The CHAIRMAN. Why close it

Mr. JOHNSTON. We don't want to close it. We want to keep it open. The CHAIRMAN. But, Mr. Johnston, if you freeze the price of wheat won't you stop trading on the board of trade in Chicago? There' would be nobody to buy and sell.

Mr. JOHNSTON. They have traded on cotton in spite of the top ceiling price Senator. The futures market on cotton is constantly traded on, at less than the ceiling price.

The CHAIRMAN. I said on March delivery there was no trading. Senator BRICKER. This is the important question involved in the commodity exchange control: Do you think it does have a definite effect in the long pull on prices to the consumer?

Mr. JOHNSTON. We think it has an effect. We don't want to stop hedging in any form or shape, but we think the little fellow who dashes in there to make a quick buck without any margin is detrimental to stability. We want hedging; that is legitimate.

Senator BRICKER. There was at least a strong inference to the conclusion that commodity exchange trading does not affect prices to the consumer. Now, I don't know enough about it to know. I want your expert judgment on it.

Mr. JOHNSTON. Senator, I am no expert on it. I don't pretend to be an expert in any of these fields, but my personal opinion is it does have an effect, because you have a rush of small traders with little capital,

and with no margins, to step in, and the price is forced up, and then when they liquidate the price is forced down. There is a greater fluctuation than if there were control of margins, in my opinion.

Senator BRICKER. In the over-all, it is inflationary, you think?
Mr. JOHNSTON. We think so, it has a tendency to be.

Senator BENTON. Mr. Johnston. I have just been given a table showing the price increases in the past year and the volume of trading increases, runing up 24 percent price increase for corn, 38 percent cotton. 99 percent wool, 55 percent cottonseed, and so on.

At the same time, your volume of trading has stepped up as high as two hundred and thirty-odd percent on soybeans, and 87 percent on land in a 3-month period.

Senator BRICKER. My question is whether or not the trading affected the price increases. They have gone along together, of course,

Senator BENTEN. It is a fair presumption that these much Eigher prices couldn't help but affer your price level, and without the power to recrilate margins, which have only been stepped up 25 percet, you la kan essential power to control the

Mr. JOHNSTON. That is arg

The CHARMAN. Tilting doon own big stepped up, Sen

ator

Senator BENTON. I think the table would be interesting for the

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2

Mr. JOHNSTON. Most farm prices we have no control over until they reach parity. We have no control over products that come from abroad. We have no control over certain other types of services, certain rail services and certain electric light, power, and gas services not under interstate-commerce regulation.

Senator CAPEHART. They are controlled by a governmental agency. Mr. JOHNSTON. No, sir; we are asking for control of those rates not controlled by a governmental agency, and I am surprised that there are as many as there are, Senator.

Senator CAPEHART. The three things you mentioned you think would materially increase the prices by what percentages?

Mr. JOHNSTON. Oh, I can't answer you that. I don't know what the answer is on that.

Senator CAPEHART. If you did have the right to control all of the things you say at the moment you do not have the right to control, then it would be impossible for prices and wages to go up?

Mr. JOHNSTON. Unless there were some unusual pressures, Senator. For instance, supposing you wanted to produce a lot more of something you are now producing, and you had to get in some high-cost producers to do it. Then you either have to use a differential subsidy or the price goes up, one or the other.

In a dynamic econmy like ours, you can't keep things static, because they are constantly shifting and changing, and we have no control over many items that are very important in the cost of a product, or the cost of living.

Senator CAPEHART. Are you admitting it is impossible to keep prices from gradually rising.

Mr. JOHNSTON. No, no; I am not admitting that at all. I am saying, if you give us these tools, we think we can control prices and wages, reasonably well.

Senator BENTON. May I ask one question? I have to be excused to go to the floor for a time, but I didn't want to leave without commending Mr. Johnston, Mr. Chairman, whom I greatly admire.

I think it is a fortunate thing for the people of the United States that we have him in this key, crucial role in this time of great crisis.

Mr. JOHNSTON. Thank you very much, Senator.

Senator SCHOEPPEL. Going to the very question that Senator Capehart has asked you, sir, about the control of wages and prices of foods, I note your charts go all the way-you start with Korea, or before Korea, and then come on down.

Now this is all related, a lot of it, to a much longer period of time than Korea.

Mr. JOHNSTON. That is right.

Senator SCHOEPPEL. The trouble with me is I have been reading a lot of these surveys on current business from 1940 on back. Sitting in these hearings I have been very definitely confused, and I will be honest about it and admit it. I have been doing some reading about this wage picture, and this consumer price index.

If we can go back to 1910, we see that we have started with an hourly wage of 66.1 cents per hour. The consumers price index, taken from those same Government publications, from 1935 to 1949, up from *39 to 40, as 100 percent, we start in 1942 with the hourly wage being 85.3 cents per hour. The consumers price index in 1942 was at 116.6 percent.