“Worst Crisis Since 1931”

Press, Volume CVIII, Issue 31661, 23 April 1968, Page 12

“Worst Crisis Since 1931”

FW.Z. Frets Assn.—Copyright) WASHINGTON, April 20. The Federal Reserve Board chairman (Mr William McChesney Martin) said during the week-end the United States was “in the midst of the worst financial crisis we’ve had since 1931,” United Press International reported. He told the American Society of Newspaper Editors it was “absolutely imperative” that Congress take immediate action to increase taxes and to cut Federal spending. “We are faced with an intolerable Budget deficit and also an intolerable deficit in our international balance of payments," Mr Martin said. “Both have to be corrected over the next few years or the United States is going to face either an uncontrollable recession or an uncontrollable inflation. “World-wide Devaluation” “Unless we reverse our current trend it will inevitably lead to world-wide devaluation of currency,” he said.

“That would be the greatest setback this country has

faced in my lifetime. It would take us a long time to recover from it” He said it was not necessary to eliminate the two deficits immediately as long as the United States made a start toward “fiscal responsibility.” Mr Martin, who spoke without a prepared text, emphasised he was not suggesting devaluation of the dollar. “I will fight to the last ditch to preserve it (the dollar),” he said. The Federal Reserve Board’s action today in raising interest rates another one half of 1 per cent to the highest point since 1929 “can be of help” in easing inflationary pressures, he declared. But he warned that “monetary policy alone could not offset a SUS2O,OOOm (SNZI73S7m) budget deficit without bringing the economy to a grinding halt.” Teat of Courage Mr Martin said it would be a “test of democracy” whether Congress in an election year had the political courage to vote the 10 per cent income surtax sought by the President—and to cut spend-

ing as well. He said it was “tragic” that a year of precious time bad been wasted by “squabbling” in Congress over whether taxes should be raised or spending cut.

Mr Martin said: “We are in the midst of the worst financial crisis we have had since 1931—not a business crisis,

but a financial crisis,” the Associated Press reported. Since the summer of 1965, the United States had steadily over-extended itself abroad and now faced a growing perpetual deficit, he said.

The country could not continue “liberal” trade policies and continuing deficits. All the protectionism seen today was due to inflation which was undermining the country’s competitive position, he said. Mr Martin said foreign bankers were worried about the trend in the United States balance of payments, but at a meeting in Basle, Switzerland, last Monday, he had made no promises to them that anything would be done about it. He praised the agreement of the Finance Ministers of the nine leading industrial countries at Stockholm on March 30 to create special drawing rights to supplement gold, dollars and sterling in monetary reserves. But he did not expect gold to be demonetised in the near future.

Death In Car.—A man died suddenly while driving along Union Street in the early hours of Sunday. He was Jack Richmond Farrant, of 47 Jervois Street, South Brighton. The car ran off the road.