FAILURE OF CREDIT

Evening Post, Volume CXVI, Issue 143, 14 December 1933, Page 9

FAILURE OF CREDIT

HIGHWAY TO INFLATION

CONCERN OVER U.S. BUDGET

CONGRESS MEETS SOON

United Press Association— By Electric Telegraph— Copyrleht. i WASHINGTON, December 13. Consideration of the Federal Budget for the fiscal year 1935 is attracting much attention in view of the reconvening of Congress in less than a month hence. President Eoosevelt conferred with his fiscal advisers today, including Mr. Morgenthau, the Acting Secretary of tho Treasury, and the Budget Director (Mr. Douglas). It is understood their chief concern is to bring the so-called ordinary Budget into balance and at the same time keep extraordinary expenditures—;that is, emergency relief expenditures—within reason. It is understood that Mr. Douglas wishes to keep the- ordinary Budget within 2,600,000,000 dollars, with anticipated revenues of about 3,500,000,000, hoping the excess will adequately provide interest charges ■on the public debt, including the additional borrowing necessary for works, crop loans, etc. It is universally recognised that the success or failure of such aims will be an important factor in the inflation controversy, as failure to maintain the Government's credit will be regarded as a sure path to inflation. While the inflation, debate- continues to absorb statesmen and economists, the United States Federal Reserve Bank figures disclosed on Tuesday that the system had sufficient gold resources to increase tho currency in circulation by more, than 50 per cent, without resorting to any inflationary measure. It was described as ready to do this as rapidly as a. new note issue could be pushed into the channels'of industry and commerce. The difficulty is that the outlets are clogged. Loans by member banks are shown to be continuing at a low level, with consequent small demands by the latter upon the. Federal reserve banks for cash. Member bank deposits were high. By utilising all its eligible resources the Federal Reserve Bank figures showed it could issue .nearly 3,000,000,000 dollars in new Federal Keservc notes, every dollar of which would havo a gold backing above the 40 per cent, required by law.