MILLIONS PROFIT FROM GOLD

Timaru Herald, Volume CXXXIX, Issue 20055, 12 March 1935, Page 7

MILLIONS PROFIT FROM GOLD

SEQUEL TO DOLLAR MANIPULATION

REPAYMENT OF NATIONAL DEBT United Press Association—By Electric Telegraph—Copyright (Received March 11, 7.30 p.m.) WASHINGTON, March 10. What is considered to be the first evidence of the “mechanical’’ inflationary effect of the decrease in the gold content of the dollar was seen with the announcement by the Treasury tonight, that 675,000,000 dollars of profit from the devaluation of the dollar, will now immediately be used to reduce the national debt. Whereas there was a profit of 2,812,000,000 dollars from devaluation, there has been a technical allotment of all but 675,000,000 dollars to other purposes, such as for instance, 2,000,000,000 dollars to the stabilisation fund. This step, along with the expressed intention to concentrate the issue of all currency in the Treasury and Federal Reserve system, by providing for the removal from all circulation of all notes hitherto issued by the national banks, will save the Government nearly 13,500,000 dollars in annual interest charges, and make technically possible a greater expansion of currency and credit. Plans to Cancel Debts The measure is considered one of the most important of a financial nature undertaken by the Administration. The gross public debt on March 7 was 28,554,000,000 dollars. The application of a relatively fractional part of the gold profit, to the retirement of the national debt cannot, on its face, be considered, that sweeping cancellation of obligations by means of tampering with the currency, which has been feared ever since the gold content of the dollar was materially reduced, but it, nevertheless, is cancellation. Moreover, although it is denied that there is contemplated any further augmenting of the currency, the method by which 675,000,000 dollars of gold will be used for the retirement of the existing national bank notes—the issuance by the Federal Reserve Bank of gold certificates, which in turn will be used to retire certain consols and bonds and under the provision for 40 per cent, gold coverage, the Federal Reserve could issue 1,687,500,000 dollars in currency—indicates only too clearly the secondary and even more dangerous inflationary possibilities of the new measure. Official Explanation The statement issued by the Undersecretary of the Treasury (Mr Coolidge) is significant: “I would say that this step does not represent inflation, but puts the gold profit to use. I do not like the word ‘inflation’ but the step makes it possible to put more money into use. The chief object of the action is to reduce the national debt and to provide for a more uniform currency.” Important lobbying groups in Washington, who had hoped to see the so-called gold profit scheme used in some grandiose inflationary scheme in their interests, for instance the soldiers’ bonds group, to-night expressed disappointment at the “conservative method” of the Treasury. But disinterested observers are constrained to wait and see whether this, the first direct' utilisation of the gold profit, would be followed by further utilisations, before concurring in the opinion that the Treasury methods were conservative.