THE AMERICAN BUDGET

Otago Daily Times, Issue 22354, 30 August 1934, Page 9

THE AMERICAN BUDGET

SITUATION OUTLINED EFFORT TO REDUCE DEFICIT WASHINGTON, August 28. (Received August 29, at 5.5 p.rn.) For the,first time since he assumed the difficult task of guiding the Administration’s finances, Mr Morgentiiau addressed the nation over the radio tonight, outlining in considerable detail the Budgetary situation, the size of the deficit, and how the Treasury hoped to reduce it. The most significant part of the speech was the revelation that 2,800,000,000 dollars of “gold profit” accruing from devaluation of the dollar and now earmarked in the Treasury for the dollar stabilisation fund, will “eventually” be used to pay part of the national debt. This naturally entails a measure of currency inflation, with currency printed against bullion and released for circulation. However, the word “ eventually ” is interpreted to mean such time as the financial structure is thoroughly sound and able to absorb.it.

(Sir Morganthau fixed the public debt at 27,000,000,000 dollars. However, it is actually less, with 1,800,000,000 cash Treasury gold deposits to come and at least partial repayment of billions loaned to banks, corporations, home owners, farmers, etc. He frankly admitted that the Administration was still spending in excess of income and was likely so to continue for some time, but the Administration is confident, that economic recovery will justify the expenditure. Mr Morgeuthau said: . “ Most of the gold profit, by the authority of the 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 reduce the national debt. The profit in question accrued through a 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 had a value of 35 dollars. Just previously the Treasury had taken the title to all monetary gold in the country, paying for it at a 20.67 rate on every ounce, and it made a profit of .14.33 dollars, which when multiplied by all the ounces of gold held by the Treasury brought the total profit to approximately 2,800,000,000 dollars. Of this 2,000,000.000 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.