BUDGET POSITION IN AMERICA

Press, Volume LXX, Issue 21256, 30 August 1934, Page 9

BUDGET POSITION IN AMERICA

DEBT STILL GROWING LARGE STABILISATION FUND ii ii 1 STATEMENT BY SECRETARY gi OF TREASURY b r if Miss* IWuv«AT«MI-»* SLMIUO <- TELRORAJ'H— COPTBKJHI.) (- (Received August 29, 7.15 p.m.) C WASHINGTON. August 28. For the first time since he assumed the difficult task of guiding ( . the finances of the Administration, r Mr H. T. Morgenthau of the Treasury) addressed the_ nation by radio to-night, outlining in considerable detail the budgetary situation, the size of the deficit, and how the Treasury hoped to reduce it. The most significant part of bis ± speech was the revelation that the j 2,800,000,000 dollars "gold profit" accruing from the devaluation of the dollar was now earmarked in the Treasury for a dollar stabilisation fund and would "eventually" be used to pay part of the national I debt, j Mr Morgenthau said: "Most ol the gold profit, by the authority of Congress, was segregated in the stabilisation fund. For the present, we propose to keep it there, but 1 call your attention to the fact that ultimately we expect this profit to flow back to the j stream of our other revenues, and ' thereby reduce the national debt." This profit accrued through a > i book keeping operation when the * I amount of gold fixed by law as the , j equivalent of a dollar was reduced I from 23.22 grains to 13.71 grains. | This meant that an ounce of gold } | was worth 20.67 dollars one day, j i and the next had a value of 35 ■ dollars. Just previously the Treasury had taken the title to all ( ■ monetary gold in the country, pay- j ; ihg for it at the rate of 20.67 dol- , j lars. On every ounce it made a j I profit of 14.33 dollars, which brought j ! the total profit to approximately j 2,800,000,000. ■ , Of this, 2,000,000.000 is set aside , ' by law for the stabilisation fund j I with which the Treasury has been , seeking to keep foreign exchange i I quotations at desirable levels. j; j The use of this profit to pay off ; 1 the national debt naturally entails j ! a measure of currency inflation, j i with currency printed against the < bullion and released for circulation. However, the,, word eventuallv , is interpreted to mean at such a time as the financial structure is . thoroughly sound and able to absorb it. ! Mr Morgenthau fixed the public debt at 27,000,000,000 dollars. How- , ever, it is actually less, with 1,800,000,000 dollars cash in Treasury gold deposits to come, and the eventual, at least partial, repayment of the billions lent to banks, corporations, home owners, farmers, etc. He frankly admitted that the Adj ministration was still spending 1 more than its income, and said it j was likely to continue to do so for I some time, but the Administrationwas confident that economic recovery would justify expenditure.