Title: Inflation in the 60's
Headings: Inflation in the 60's
Inflation in the 60's
Content: While industrial production continued to rise and unemployment continued to fall, the economy came under severe pressure. The rapidly increasing general price level was unpopular, and eroded the incomes of the elderly and other Americans living on fixed incomes. High inflation also discouraged people from saving money, and increased the pressure on the dollar, which was already in a precarious position because of its role in the international monetary system. An increase in the demand for loans for defense contractors led the Federal Reserve to raise the discount rate from 4 to 4.5%. The major disruption to the delicate balance achieved in the first half of the decade was the war in Vietnam. In July of 1965, President Johnson committed American forces to Vietnam. Wars generally bring about inflation, but the unrelieved financial demands of the war became a serious burden on the economy. The Defense Department estimated U.S. expenditures in support of obligations in Southeast Asia as $103 million in 1965, $5.8 billion in 1966, $20.1 billion in 1967, $26.5 billion in 1968, and $28.8 billion in 1969. Johnson did not want to consider it an all-out war, so he was reluctant to request that Congress pass a tax to finance the war. For two years, he held back, thus blowing a growing hole in the federal budget.