Gold Profit

Wanganui Chronicle, Volume 79, Issue 59, 12 March 1935, Page 5

Gold Profit

DOLLAR DEVALUATION REDUCING NATIONAL DEBT [By Telegraph—Press Association—Copyright! Received March 11, 7.50 p.m. WASHINGTON, March 10. "What is considered to be the first evidence of the “mechanical” inflationary effect of the decreased gold content of the dollar, is seen with the announcement by the Treasury to-night 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 the 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 Stabilistion Fund. This step, along with, the expressed intention to concentrate the issue of all currency in the Treasury and Federal Reserve system by jiroviding for the removal from all circulation of all notes hitnerto issued by the national banks, will save the Government nearly 13,500,000,000 dollars in annual interest charges, and will make it technically possible to bring about a greater expansion of currency and credit.

The measure is considered one of the most important of a financial nature undertaken by the Administration. The gross public debf 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 as a sweeping cancellation of the obligation 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 a cancellation. Moreover, although it is denied that there is contemplated any further augmenting of the currency, the method by which the 675,000,000 dollars will be used for the retirement of 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 40 per cent, gold coverage provision, 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. A statement, issued by the Under-Sec-retary of the Treasury, Mr. Coolidge, is significant: “I -would say this step does not represent inflation, but puts the gold profit to a use. I do not like the word inflation, but the step makes it possible io put more money into use. The chief object of the action is to reduce the national debt and provide for a more uniform currency.” Important lobbying groups at Washington who had hoped to see the socalled gold profit used in some grandiose inflationary scheme in their interests, for instance the soldiers’ bonus group, to-night expressed disappointment at the “conservative method” of the Treasury, but disinterested observers are constrained to wait and see whether this first direct utilisation of the gold profit would be followed by further utilisations before concurring in the. opinion that the Treasury methods were conservative.