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was at Olt ' -LIJJID NG%on. J nD w..., ,7" 1 App The orel~ a 2001 1pp8/p9 P856B8~k94if0~the inventory of *J. s m 7ned seminar or - - , -.the ErWire State Paper,:Association-and the faclfl -"-" for -.._ .-_--. storage. And of course, the . ever- ,/lied PaperS~-lcsmen'sAssociation washeld at , r. ever- resent inflation was increasing all p p R/T-to ss the challenges and opportunities costs and quietly absorbing facturin n g ma u aerars in 1975. ior rnerd ~vallable - working capital. Moreover, while z.:.Part of ,,hie,prmnted by RIT. Pape :suppliers demanded prompt payments ::faculty Including Dr. H. J; "Pate" Raphael and from printers the customers of printers and 'Aaxigar,t ? Professor, David 0lssen,,.Packaging publishers were .taking the maximum time In ;.,Science Department Speakers from the School -,paying their commitments.The printer realized of -Printing -,included Professor Walter -Horne, - that he was in the middle of a capital squeeze. I? Professor William Birkett, ProfessorJoe Brown, All these events began to hurt the printer and at ProfessorAntharySears, and Dr. Julius Silver, that point more and more paper buyers decided :College . of :,Graphic 4ArLs sand Photography, passing uu the allotments and using up their :,Suddenly-the supply-of paper had reversed. The market outlook tor paper ' .'of cancellations actually exceeded the tonnage - by-Jack Kronenberg -of -new orders. Buyers of paper realized that 'A *few months -ago a major topic of now they could get paper deliveries rather had i i on tuat ..conversation in -the paper industry was -the quickly from many mills. The s . shortage of paper. Supposedly it was to be a changed almost overnight. Mills began to reduce .-long range situation that would concern and running time and with the. approaching affect the --entire -consumer population. holidays, they ordered long shut-downs at According to most reports, we were in serious Thanksgiving and Christmas. Instead of -trouble But. Then, in October 1974, the operating 24 hours a day for seven (or six) days ch week e fi d f . a ays ve our and situation changed. It seems -that the shortages a week, mills ran h at exists evaporated. Paper was available again. In fact, And that is basically the situation t suddenly we had a surplus. today. Most of us have wondered what happened. In addition to the "storage and capital" there probably never was a real - response to the "shortage" situation, there were In one sense , ---shortage, only a shortage prognostication. For other reasons for this apparent reversal. And example, few, if any, printing jobs were refused there are valuable lessons in an analysis of the due to the lack of paper. To be sure, the desired events. After what happened, I believe that the grades of paper in the desired weights were not industry owes itself an analysis. After all, early always available when needed. But substitutes prognostications had indicated -that paper - usually heavier stock and higher grades manufacturers planned to expand their -were available and could be used. production facilities at a rate that would lag It was true that some printing presses were behind foreseeable demand - short of a shut down-due to lack of paper, in most of depression. But since October 1974 we have a these cases, however,--these presses were in -surplusstructure of productive capability. plants with a history of uncongenial relations ..Let's: consider some of the manufacturer's formerly-relied on-the purchase of job lots-or - 1, -Some .new manufacturing -facilities -seconds found .their -source had -probably came on -stream faster than -diminished- In some cases, it vanished. But, for -anticipated. In our competitive economy, when -the most part, a permanent shortage did not .a ' manufacturer senses an opportunity, for develop although there was a temporary pinch. greater profits, we should never underestimate tial t hi i en s po on or It was in October 1974 that the printers and > the strength of that motivat publishers began to feel the pinch of their growth. And may it always operate that way! problems. The cost of financing a large paper 2. Coupled with this profit motivation, inventory was high and still rising. Money value paper mill personnel found they could increase Approved For Release 2001/08/09 : CIA-RDP85-00988R000400050024-8 production with relatively sma11 Improvements. - United States parallels very closely the gross Y diftrI9*&& - 2001/08709: CIA-I iJW9d80, todJb&M4t -hat the GNP 3. Paper mills-began to run "all out" on currently Is depressed. 'grades and weights that they:. could -produce We are beset by inflation, an unfavorable most efficiently. Minimum-trims provided tills foreign currency situation, a - bad credit as wide as the paper machine could handle. And situation,-an energy shortage, not to mention. ,they ran day in and -day-out month after coals of warfare which could fan into flames. ,month. It was a new experience --- never done The western-world is`suffering-from rampant In order to operate this way, mills actually But it is a quirk of human nature that causes -production.::` ., as we know it. ` . t before. It-was like running a printing press with inflation and a depression ---simultaneously. no -makereadies or plate changes and few speed There are those who predict the end-of-our restrictions. It could have been -called:,-pure freedoms and perhaps the demise of civilization , THAT WILL HAPPEN - UNLESS WE reasonable supply of raw materials, the people, , HAVE A DEPRESSION.' the know-how, and the equipment. Now add-another condition. It's this: Furthermore, the"United States has an almost UNLESS ME YEAR A DEPRESSION. I believe desperate need for the foreign exchange that -that the .sear--of a depression caused paper - the paper industry is capable of generating on a in width, -orders were combined so as to reach rate not over 8%- in 1975 followed by a that maximum 150 inches at all times. resumption of confidence in our economy with -As a result, production -exceeded all prior good business in - 1976 and with inflation estimates. Mills had never before experienced - contained to around 6%. - this set of - was outside -the -There is still a great need for. paper. That is experience of the -experts and they misjudged -the criterion to watch.- By -most accepted the production capability of the industry, ' - criteria the United States has long enjoyed the Finally let's yoonsider, . one - reason -that highest standard of living in the world. And one everybody -- most managers, buyers, of the things that sets usapartfrom most of the manufacturers and others had used in their world is the fact that our consumption of prognostications. This final reason is probably papers such as packaging, newsprint, wall paper, the most important but the most difficult to -containers and others, as well as printing admit or accept It is the hedge of every papers, has been from 50% to 100% higher than forecaster. And when predictions turn sour, it in all other advanced countries except Canada becomes the excuse and scapegoat. It's simply and possibly Sweden. this: such and such is the case UNLESS WE -As undeveloped -countries-- where `the HAVE A DEPRESSION OR SEVERE current use of paper is negligible- as low as 1% RECESSION. -I -really don't -? know the of our per capita use -- improve their. living --difference between -these two conditions but standards, North America will be the supplier the clause is alwaysthere THIS WILL HAPPEN of paper to -these countries. We have a ---not burdened -with 50 or-,60 or;100 -pound -standard" forecast on which -many prominent - weights And if a machine trimmed ?150 inches --economists seem to agree:.: an.unemployment production-to fit the-needs of the market. If-a .brightly on the ascending.. -..paper -machine was--more- efficient .-in--the I prefer to not-accept the prognostications - - -_ . -_ .. -2 _L_ s A--- i -,for to acrstnt the productive .facilities instead of'..adapting -trending -downward and to :'see -them too x It was this fear of a recession, then evident on There should be no lack of demand fqr the horizon, that triggered the -collapse -in paper. And with a reasonably good business orders. This fear of a recession caused some big climate, we should return to a tight supply buyers to re-orient their purchasing policies. situation or one that is periodically tight. What . Paper lives its life doing its thing in an can we- you and I - contribute? I believe that :environment, provided by the political, we can contribute the ingredients that good monetary, and economic forces of the world. business men have always contributed - Historically the printing paper business in the optimism and confidence. Approved For Release 2001/08/09 : CIA-RDP85-00988R000400050024-8 Vow je Approved For Release 2001/08/09 : CIA-RDP85-00988R000400050024-8 TAB Approved For Release 2001/08/09 : CIA-RDP85-00988R000400050024-8