Pine Bluff daily graphic., 1920-02-07
Warburg FavOrs
 Budget for All
 Nations of Globe

Washington, Feb. 5.-Establish- ment by the nations of the world of
 honestly balanced budgets is the first step toward stabilization of foreign exchanges and the restora- tion of normal financial conditions,
 Paul M. Warburg of New York, form
 CT member of the federal reserve
 board, today told the second Pan American conference.
 "A country's ability, without addi- tional borrowing, to balance It's
 regular budget, is the test of it's
 solvency," MT. Warburg said. "The character of this test at this june ture will decide the measure of its future credit; and upon that. in turn, will largely depend it's power to re- habilitate it's commerce and trade and it's foreign exchanges
 A number of countries will never again regain their previous exchange i levels, MT. Warburg predicted, The ability of those countries to pro 1 duce and to save, he added, would de- termine the extent to which they could reclaim the shrinkage of their currency standards.
 But whatever the level they may be able to recover,' he continued,
 ultimately it will be to their vital 1 interest once more to fasten 1t to definite gold relation and to re-es-
 tablish stable exchange, fluctuat- l ing between the maxima and mlnlma ] of gold partities, without which a ] country's trade and growth will re-
 main subject to fatal handicap.
 sThe more perfect the machinery 1 of credit, however, the more insig- nificant becomes the necessity of I settling in actual gold.
 "We are living in an era where the production of money and credit \ has increased and the production of 4 goods has decreased. In order to
 emerge we must produce less credit
 and money and produce more goods I Consumption taxes that is taxes levied on spending and not on say
 ing, were advocated by Mir. War. burg, who declared that "eXtrava. gance must not only be curbed or top, but just as much on the part , of the masses receiving the bulk o1 the national income and, in the az gregate, doing the largest share o1 the country's spending"
 "Our present form of taxation has I proved failure," MT. Warburt said, sin so far as in a rising mar ket the equivalent of extreme in come and profit taxes is being add r cd to the price the public pays fol
 things, and in so far as it cripple' the investment power of countr! and thereby retards its further de : velopment."
 It is the duty of the United States z he said, either thru private initiative or. if need be, thru direct govern ment action, to relieve those coun tries where reconstruction is be : yond the grasp of people or wher' it is facing starvation or economi' ! annihiliation" He predicted tha the three Americans would "be drawl
 together in commercial and finan
 cial union of growing strength ant
 intimacy as result of the fac
 that "capital in the old world vii
 lf find so vast field in work of re . construction and colonization il darkest Europe that it will not b
 able to devote itself as literally t the development sof the countries o y this hemisphere as it did in tn /. past"
 z MT. Warburg summarized his view as follows:
 ,, :. "The debacle of foreign eX l changes is the logical consequenc : of the financial anarchy prevailin
 since king gold' was deposed. ' "The discount of the foreign eS : changes of borrowing countries not the disease, but the symptom.
 Sol 1o%xy ' various degrees of depreciation c ;, money and credit, and between dis U similar grades of productivity, i e different countries.
 > "When the equalizing power c Il gold, interest rates, and governmer II credit has spent itself, the discour Y ly remaining means of adjjustmen IS "Foreign exchanges of the cour
 tries affected cannot be stabilize
 until the process of dilution of cu1
 rency and government credit is un
 formly reduced. or arrested. 0 "Rigidly balanced budgets ar therefore, required, because they r'
 store the public credit, because the 10 arrest further imitation, because the ' lead to curtailment of expenditure 'e and increased taxation, which. y properly devised, makes for decrea' ' ed consumption, increased productio la and lower prices. And these in tur e- are essential in that they stimulat '. expectations and discourage unne le sential importations, and thereb P bring about the possibility of mol U nearly balancing the two.
 III "For years to come the rehabilit; e- ton of currency standards and fo ls eign exchange levels of borrowin " countries will depend primarily upo Fee the fiscal policy of their goverl .u ments: it will be the character {