Documents / FOIA release
This Top Secret study by the Interdepartmental Coordinating Group on Germany and Berlin, dated July 12, 1961, and released by the Central Intelligence Agency, answers NSC Directive No. 58 of June 30, 1961. It sets out courses of action for the Berlin crisis but does not judge their merits. It covers imminent presidential decisions, a three-phase timetable running to January 1, military preparations and mobilization, covert action, economic sanctions, public information, negotiating positions and checkpoint procedures for East German personnel.
## SECRET ## Appendix-A Secondly, there are speed limits on the pace of economic expansion. It takes time to put idle men and idle machines back to work. A sudden spurt of spending could strain the flexibility of adjustment and produce price rises along with output gains even at a time when there is slack in the economy. It is difficult to say how fast is too fast by this standard. It is certainly questionable whether a quarterly increase in output as great as 4 percent is compatible with stable and smooth expansion. No peacetime expansion in the 1950's raised real GNP by more than 3.3 percent in one quarter. Third, the expansion of government spending involved in a mobilization program would raise demand selectively. It would increase orders for metal products far more, proportionately, than for textiles. Mobilization could therefore run into key bottleneck areas while slack existed in other sectors. There are certain factors in the economy which mitigate but do not eliminate the problem of bottlenecks. The area of durable goods manufacturing has considerable excess capacity currently and it would be the recipient of the major share of additional defense procurement. Furthermore, economic resources are substitutable and can be shifted to alter the composition of output. Fourth, and most significant, expectations of a major upsurge in military spending and of the institution of direct controls can set off price and demand reactions out of proportion to the government's use of resources. Consumers and firms naturally wish to protect themselves against possible price increases and shortages. Their attempts to do so can easily produce inflation and scarcities even when government procurement demands are modest. This description of the psychological inflation of 1950-1 is taken from page 5 of The Economic and Political Hazards of an Inflationary Defense Economy, Materials prepared for the Joint Committee on the Economic Report by the Committee Staff, Joint Committee Print, 82d Congress, 1st Session, Washington, 1951, page 5: "...the inflation experienced thus far owes its impatus to the civilian segment of the economy and has been the result (1) of 'scare' buying by consumers seeking to be 'sitting pretty' individually in a period of general shortage (to that end they borrowed, liquidated savings, and
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FOIA release, from the cia-readingroom collection. The PDF is mirrored here; the original link is under it. The text was read from the page images by an OCR model; expect the odd misread word. 163 pages are in the text index: search them above, or from the library's search.