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
achieved without strain. Except for the possibility of bottlenecks and cost-push pressures, these developments are consistent with price stability. The danger of excess demand inflation appears slight.
Opposite conclusions emerge with the high assumption about defense spending. As shown in the table, projected GNP crosses potential in mid-1962 and exceeds potential by more than one percent at the end of 1962. Unemployment would have to fall to about 3 1/2 percent by the end of the period to match the demand for output. While such a low unemployment rate is desirable in itself, it may be associated with a serious threat of inflation. Furthermore, the high estimates of defense call for a rise in output of 4 1/2 percent in the fourth quarter of 1961 and a further increase of 3 1/2 percent in the next quarter; growth at this rate could strain the economy. Unless private demand were contained by increases in tax rates or exceedingly tight money, inflation would be probable in the absence of direct controls.
## 2. Impact of "Scare Buying" and Reduced Savings Rate
The above projections assume "normal" responses in the private economy. Specifically, consumers are assumed to raise their spending in parallel with the expansion of their incomes, maintaining their saving at 7 to 8 percent of their disposable income. It is quite likely, however, that the prospects of a national mobilization effort would lead to "scare buying" and a resulting decline in the saving rate. Such a development would, of course, magnify the danger of inflation. To take a concrete example, suppose the saving-income ration was reduced by 1 1/2 percentage points in the current quarter and by 3 points in 1961-IV. A spending spree of this magnitude is quite conceivable, in light of the Korean experience reviewed below. The additional consumer outlays would add $9 billion to expected GNP for 1961-III and $22 billion in 1961-IV. As shown in Table 1, with the high estimate of defense, output exceeds potential in 1961-IV, and a 7 percent gain in GNP is required in that quarter. Rapid inflation would be inevitable in the absence of controls.
With the spending spree added to the low estimate of defense, expected output remains below potential, but the 5 $ \frac{1}{2} $ percent rise in real Not linked to a story yet.
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.