THE DOLLAR AND DEBTS

New Zealand Herald, Volume LXX, Issue 21480, 2 May 1933, Page 8

THE DOLLAR AND DEBTS

In pursuance of its monetary programme the Congress of the United States has given the President power to devalue the dollar in terms of gold. This is a proceeding for which considerable claims have been made. It has been commonly said that a certain, and by inference immediate, consequence would be a lightening of the debt burden carried by public institutions, from the central Government downward, by industry and by individuals. That this claim made in general terms, and often dogmatically, is not necessarily correct was pointed out recently by a prominent British banking authority. Discussing the very question of devaluing the dollar,_ he explained that a large part of the indebtedness of companies of all kinds, local authorities and Governments in the United States was fixed explicitly in terms of gold. In countless instances bonds defined the amounts due as "payable in United States gold of the present standard of value ... of the present standard of weight and fineness . . .

of, or equal to, the standard of weight and fineness existing on April 1, 1930." The mortgage indebtedness of the American farmer, he added, was fixed in practice, if not in so many words, in much the same way. Therefore, it was argued, devaluation of the dollar might result in an increase in the actual figure of all these debts to compensate for the reduced gold content. Naturally the possibility of such a situation might affect tho legislation by which the change was effected, the law stipulating that wherever a bond or other instrument represented a number of dollars in terms of the old standard, it should be read as representing the same number of the new standard. But it is stated to be uncertain whether this would stand a challenge in the Supreme Court. The Legislature is not all powerful in the United States. A law can be declared unconstitutional, and thus be nullified. Most of this is speculation, but it does suggest doubt and the possibility of delay through litigation.