U.S. BANK CRISIS

Hawke's Bay Tribune, Volume XXIII, Issue 74, 9 March 1933, Page 8

U.S. BANK CRISIS

WIDER ASPECTS OF SITUATION

SOME FORM OF INFLATION

MANAGED CURRENCY. New York, March 7. Aside from immediate dislocations growing out of the banking crisis, the nation’s thoughtful attention is being directed towards several more important long-time a.‘.*iecfs of the sieuation, these being principally the United State’s position with regard to the gold standard, the problem of a complete banking system reform and an extensive readjustment of public finances. It is predicted that the United States will prefer to have “managed currency,’’ possibly under some system similar to the British, whereby bullion will be reserved for international obligations. Also some form of inflation is considered more or less likely, irrespective of what gold policy the Govern-

ment may announce after the temporary crisis is over. This may be achieved by the devalorisation of the dollar, although official sources strongly disavow its likelihood. The question, it is believed, closely involves the problem of preventing a too rapid increase of international prices.

In regard to the question of banking reform, it is clear from the point of view of the ordinary bank depositor that reform must more particularly aim towards restricting the investments by banks of depositors’ funds in order to avoid speculative orgies in boom time. One of the greatest benefits expected from the present crisis is the increased prestige and power it will give the new administration to force radical cuts in Governmental expenditure, casing taxation and leading to an improvement in business. z The Federal Reserve Bank here was authorised by the Secretary of the Treasury, Mr Woodin, to resume making advances of currency to its members, provided they deliver to the reserve institution all gold and gold certificates which the banks own in their own right in return for other forms of currency. USUAL OPERATIONS. EXCHAN GE OBLIGATIONS. Washington, March 7. The Secretary of the Treasury, Mr Woodiu, late to-uight authorised the Federal Reserve Bank to conduct their normal and usual operations as fiscal agents of the United States in transactions pertaining to the exchange obligations of the United States. ISSUANCE OF SCRIP STATE-WIDE PLAN LAUNCHED New York, March 7. The State legislature has approved of a plan launched by the Governor, Mr Lehman for a State-wide issuance of scrip. COLD DELIVERY REFUSED Calgary (Alberta), March 7. The delivery of 5185 dollars in United States gold coin in payment of maturing debentures and accrued interest was refused on Tuesday night by the Marlen Trust Company, of Malden (Massachusetts).

Inability to remove gold from Canada to the United States because of the Canadian embargo against the export of gold, was given as grounds for the refusal to accept payment in Calgary. SUDDENNESS OF THE CRISIS Sydney, March 3. The news from the United States makes it appear that the Reconstruction Finance Corporation has proved only a temporary prop for banks which were feeling the weight of frozen assets, The corporation, with a capital of 1,500,000,01)0 dollars, was formed primarily for the purpose of providing for the continuance of business by banks which, although they had assets to represent their liabilities, could not realise their assets and found themselves holding less than the required amount of cash in relation to their liabilities. Advances were made by the corporation to banks, and these advances had the effect of righting the situation so far as the cash holdings were concerned. There was even further improvement. The depletion of cash arose largely through the mania for hoarding which set in among the people, but during the latter part of last year the mania had spent itself, and currency was being emptied from its hiding places into the banks. Now the hoarding has got a new lease. People are wanting currency rather than deposits. What has been the motive power making for the renewal of the mania is not yet apparent. The United States newspapers by the ratest mail speak of extremely easy money. Deposits were so overflowing the banks, and there was so little call for their use, that deposits rates on January 23 were reduced to the lowest on record, namely, one quarter of one per cent, for demand deposKs and one half of one per cent, for tune deposits. The rate of discount on short term bills was at the same time reduced to one-quar-ter of one per cent. The probabilities are that the facts of the budget, though they are nearlv three months old are being realised The actual deficit for the year ended lune 30. 1932. was 2.473,000.000 dollars, and the estimated deficit for the present year is 1.146,000 dollars Senator Borah declares that on present prices the budget cannot be balanced The income of the people, he stated, is 35,000,000.000 dollars, and this is about the amount which is taken from the people in taxation, city. State and National, and by interest payable on

private indebtedness. The rest of the world, except France, he has pointed out, is on a managed currency basis. While the dollar climbs in value the currencies of other countries is accommodated to their economic situation. The result is that the United States is not only losing its foreign markets, hut is losing its domestic markets. The group to which Senator Borah belongs believes that the Roosevelt Administration will have to face a struggle between the Western States advocating reflation and the Eastern States demanding the retention of the gold standard.