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.
“Cooper”8 pages
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# SECRET ## Appendix A -14- For the remainder of 1951, real GNP expanded smoothly at an annual rate of about five percent. Inventory investment continued at a rapid rate. Consumer spending eased, however, with the saving ratio running near nine percent. The decline in real consumption permitted real defense outlays to rise by more than the total gain in GNP. Federal defense expenditure reached a 41.8 billion annual rate in 1951-IV. Under the impact of direct controls and tightened monetary and fiscal policy, the inflation lost its vigor. Shortages were rare. Much of the upward movement of retail prices that followed price controls can be attributed to the previous rapid increase in wholesale prices. In retrospect, it seems clear that controls came too late. There appeared to be little need for them in the two months preceding the Chinese intervention, for inflation was abating. Much damage was done in the two months following Chinese entry into the conflict. It became apparent--the President even announced--that controls on prices and wages were imminent. Price stability is inconceivable in such a situation. ## D. Lessons of the Korean Period The chief lesson of the 1950-51 experience is that expectations of inflation and of direct controls can be powerful destabilizing forces. Furthermore, deliberations in Congress on appropriate anti-inflationary policy and statements by the Administration unavoidably hasten the inflationary process. Ideally, it would appear that the President should always have emergency powers to freeze prices and wages for a short period provided that he simultaneously asks Congress to legislate direct controls. Such emergency powers should be acquired at a time when there is no emergency and when nobody could expect that the President is about to use them. Otherwise, the mere request for such powers could provoke a spending splurge. Optimal anti-inflationary policy cannot be legislated during a period of emergency. For example, a stiff and clearly temporary excise tax on consumer hard goods might have had highly beneficial effects in discouraging consumer buying during the summer of 1950. However, the mere mention of such a proposal by any responsible public official is bound to intensify consumer demand. People would then endeavor to beat the excise tax as well as higher price-tags and shortages.
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FOIA release, from the cia-readingroom collection. The PDF is mirrored here; the original link is above. The text was read from the page images by GLM-OCR; expect the odd misread word. 163 pages are in the text index: search them above, or from the library's search.