DOLLAR DEVALUATION

Ashburton Guardian, Volume 55, Issue 128, 12 March 1935, Page 6

DOLLAR DEVALUATION

PLAN TO USE THE PROFIT. REDUCING AMERICA’S DEBT. (United *Br eaa Association— Copy right,) WASHINGTON, March 10. What is considered to be the fiis, evidence of the “mechanical miiationarv effect of the decrease m the gold content of the dollar was seen with the announcement by the Tieasuiy to nicrht that 675,000,000 dollars of the profit from the devaluation of the dollar will now immediately be used to reduce the national debt. There was a profit of 2,812,000,000 dollars from the devaluation, but there has been a technical allotment for all u 675 000,000 dollars to other purposes, such as, for instance, 2,000,000,000 dollars to the stabilisation fund. This step, along with the expressed intention to concentrate the issue of all currency in the Treasury and Federal reserve system by providing for the removal from circulation of all notes hitherto issued by the national banks will save the Government nearly 13,500,000 dollars in annual interest charges, and make technically possible the greater expansion of currency and credit. 1 The measure is considered one of the most important of a financial nature undertaken by the administration. The gross public debt on March 1 t was 28,554,000,000 dollars. The application of a relatively fractional part of the gold profit to" the retirement of the national debt cannot, on its face, be considered that sweeping cancellation of an obligation by means of tampering with the currency, which has been feared ever since the gold content of the dollar was materially reduced, hut it nevertheless is a cancellation.

Powers of Reserve Bank, Moreover, although It is denied that there is contemplated any further augmenting of the currency, the method by which the 675,000,000 dollars will be used for the retirement of the existing national bank notes —the issuance by the Federal reserve bank of gold certificates, which in turn will he used 'to retire certain consols and bonds, and under the 40 per cent, gold coverage provision the. Federal reserve could issue 1,687,500,000 dollars in currency —indicates only too clearly the secondary and even more dangerous inflationary possibilities of the new measure*. A statement issued by the Undersecretary of the Treasury, Mr John Coolidge, is significant. “I would say tips step does not represent inflation, but puts the gold profit to use. Ido not like the word inflation, but the step makes it possible to put more money into use. The chief object of the action is to reduce the national debt, and provide for a more uniform currency.”

Important lobbying groups in Washington who bad hoped to see the socalled gold profit used in some grandiose inflationary scheme in their interests, for instance the Soldiers’ Bonus group, to-night expressed their disappointment at the “conservative method” of the Treasury, but disinterested observers are constrained to wait and see whether +F.‘« first direct utilisation of the gold profit will be followed bv further utilisations before concurring in the opinion that the Treasury methods are conservative.