893.50/12–148: Telegram
The Consul General at Shanghai (Cabot) to the Secretary of State
[Received December 1—7:26 a.m.]
2588. Market trends shifted frequently during month unfrozen prices beginning November 1 as kaleidoscopic events impinged highly sensitive market. Depleted inventories and redundant purchasing power produced partial period skyrocketing prices.
Consequent high price level and improved inventory situation produced acute money stringency with fantastic interest rates reaching 500 per cent per month. Price trends basic foods reversed consequentially.
Third phase began November 22 when new Finance Minister Hsu Kan inaugurated Government selling program precious metals (ref-Airgram A–1038, November 24). Queues prospective gold bar purchasers increasing daily with Government apparently adopting delaying tactics in selling operations.
Fourth phase in incipient stage as mounting apprehension concerning military situation central China causes Shanghai residents revise personal and economic security plans. Previously acquired hoards durable commodities no longer desirable method of protecting accumulated savings face advancing Communist armies. First severe impact fourth phase experienced local real estate market which dropped 50 per cent in few days accentuated by planned or actual evacuation tenants and owners. Automobile market collapsed quickly with large number being exported Taipei and Canton. Fourth phase extending to household goods and durable goods generally. Articles doubtful utility, value and security during an emergency are beginning to feel depressing effects advancing Red Armies.
Inform Commerce.