Severe shortages of raw materials abroad and probable mandatory price controls at home were forecast today by Walter E. Hoadley, chief economist for the Bank of America.
"We're heading for a prolonged depression," Hoadley said, in reference to prospective worldwide shortages in 1980. "This malaise which now afflicts us, this lack of confidence in government, is a worldwide phenomenon."
Hoadley predicted world shortages in aluminum and copper as well as oil. He and University of Southern California economist Arthure B. Laffer agreed that the impact of raw materials scarcity would be price increases contributing to inflation which is already double-digit in most industrialized nations.
Despite these predictions, Hoadley was bullish as he outlined his vision of the future to a national convention of security analysts. He said that the U.S. economic system is "still largely self-correcting" and predicted that scarcities would cause Americans and their government to become more concerned about stimulating supplies rather than increasing consumption.
This tendency, Hoadley said, already is working to help check excess government spending, increase incentives for investment and productivity and reverse attitudes of "benign neglect" towards the U.S. dollar. As evidence, he cited reduced federal spending and the passage of such measures as Proposition 13 in California.
Nonethelss, Hoadley told reporters that it might take "a third crisis, an energy equivalent of Pearl Harbor," to convince Americans that they suffer from an actual gasoline shortage rather than one that has been created by the oil companies . . ."
Hoadley's mixture of short range pessimism and cautious long-term optimism typified a mood that has prevailed at this convention. Many analysts here feel that the outlook for the stock market is uncertain and some also are worried about a possible recession. But most also seem convinced that the market is under valued and that the United States is at least drifting in the direction of improving business incentives.
Hoadley is an opponent of mandatory price controls. However, he said that political pressure for controls is increasing and predicted that is is likely that they ultimately will be imposed. If this happens, he said, it is imperative that corporations and unions which have complied with President Carter's voluntary 7 percent wage and price guidelines be allowed greater increases than those who have not been complying with the guildelines.
Hoadley said that the voluntary guidelines, on the whole, had worked well.
But another view came from Teamsters President Frank E. Fitzsimmons, who told the analysts that the guidelines "so far have not made a dent in stemming the tide of inflation."
"Price rises in food, energy and housing have skyrocketed," Fitzsimmons said. "And while the guidelines initially were proposed to halt an inflation psychology, who can deny the current reality of a 13 percent inflation rate?"
Fitzsimmons quoted approvingly from Albert Rees, a Princeton economist and director of the Council of Wage and Price Stability in the Ford administration who last week called the guidelines "absurd" and said they were contributing to inflation.