DEVALUED DOLLAR

Greymouth Evening Star, 30 August 1934, Page 7

DEVALUED DOLLAR

HUGE PROFIT TO TREASURY TO REDUCE U.S.A. DEBT [BY CABLE—PRESS ASSN.—COPYRIGHT.] WASHINGTON, August 28. For the first time since he assumed the difficult task of guiding the Administration’s finances. Mr Morgenthau, Secretary of the Treasury, addressed the nation over the radio tonight. He outlined in considerable detail the budgetary situation, the size of the deficit and stated how the Treasury hoped to reduce it. The most significant part of his speech was his revelation that 2,800 million dollars in “gold profit” has been accrued from the devaluation of the dollar, which is now earmarked in the Treasury for a Dollai* Stabilisation Fund, but' he stated that it will "eventually” be used to pay part of the national debt. This naturally, entails a measure of currency inflation, with currency being printed against the bullion, and released for circulation. However, the word ‘.‘eventually” is- interpreted to mean such time as the financial structure is thoroughly sound, and is able to absorb it.

Mr Morgenthau fixed the public debt at 27 billion dollars. However, the debt is actually less, with 1800 million dollars cash at the Treasury, also gold deposits to come, and the eventual at least, partial repayment of billions of dollars loaned to banks, corporations, home owners, farmers, etc. The Treasury frankly admitted that the Administration was still spending in excess of its income, and that it. was likely so to continue for some time, but the Administration was confident that an economic recovery would justify this expenditure; Mr Morgenthau said: "Most of the gold profit, by the authority of Congress, is segregated in the so-called Stabilisation Fund, and for the present, we propose to keep it there; but I call your attention to the fact that, ultimately, we expect this profit to flow back to the stream of our other revenues, and thereby to reduce our national debt. The. profit in question has accrued through the bookkeeping operation when the amount of gold fixed by law as the equivalent of the dollar was reduced from 23.22 grains to 13.71 grains. This meant that an ounce of gold was worth 20.67 dollars one day, and the next day it had a value of 35 dollars. Just previously, the Treasury had taken the title to all of the monetary gold in the country, paying for it at 20.67 dollars rate. On every ounce it made a profit of 14.35 dollars, which when multiplied by all of the ounces of gold held by the Treasury brought -the total profit to approximately 2800 million dollars. Of this, 2000 millions was set aside by law for the Stabilisation Fund, with which the Treasury.has been seeking to keep the foreign exchange quotations at desirable levels.”