Perth Amboy evening news., 1923-06-25

WASHINGTON, June 25.-As the
| fiscal wear draws to it's close, June
| 40. il has become apparent that the
| deficit in the Federal Treasury which
was feared at the beginning OF the
year has been turned into a surplus,
the proportions of which car not yet
be stated.
This rtun result further en-
phasizes the magnitude OF the TASK
which has been discharged in getting
over the early and most dlftlcult
wears of the war debt funding. A
great war leaves a country in more
or less chaos and burdened with
debts which have been assumed IN
the haste and heat of conflict. The
| sober and difficult task is TO reduce
this debt and put it in shape to be
carried by the public with the
least effort. With the close of the
present fiscal year this preliminary
task will have been accomplished
and the great "a debt Of the United
| States will be on an easy basis which
will, to a large extent, almost take
care of itself.
During the last two years the pub
lie debt has been reduced by more
than a billion and a half. The debt
which stood at approximately S24,-
600, 900, 900 at the end of the fiscal
year 1921 will at the end of the cur
rent fiscal year be down to about
| S22,400, 5000. This represents a
net reduction of what the Govern
ment owes. The larger financial OPP
Grafton, however, has been the re-
funding of debt due.
No government can pay back dol
lar for dollar the sums borrowed
during war time when they fall due.
In such circumstances a r~efunding
operation is made. This means that
the Government borrows more
money with which to pay what. is
due. The freshly borrowed funds
have a longer period to run. In each
r%efunding operation, the Treasury
seeks, and so far has succeeded, in
paying off absolutely a portion of
what falls due and renewing a lesser
amount. Thus, the creditors or bond
holders get their money as it falls
due and the Governments financial
position becomes constantly sounder.
Saving Interest Charges
| Governments do not in the first in
stance seek to borrow for long per-
iods in time of war. Interest rates
go up during periods of heavy bor-
rowing. Should the Government
borrow, during the war, some st0,-
900, 900, 600 at 6 per cent. interest for
fifty years it would be obligated to
continue paying interest at that rate
for half a century. Instead it makes
loans for only five or ten years,
knowing that, in all probability, by
the time the debt is due it can bor-
row money with which to pay off the
6 per cent bonds at only . per cent
or possibly AZ per cent. over a
long period the saving in interest
amounts to millions of dollars.
During the last two years some
seven and a half billion dollars have
been funded in this way by the
Treasury. The Treasury acts craft
ly in these operations. 1t watches
the money market closely and puts
out issues of new securities to raise
money with which to pay off ole
ones at just the right moments. Gov,
eminent bonds must be issued a
rates of interest which will attract
investment. During the war, wher
the American flag was being borne
over the European battlefields, oeo'
pie COuIO De asked TO SUBSTITUTE u
Government loans for patriotic rea
sons. That slogan no longer holds
good Uncle Sam must take hi
chances in the money market Will
John Smith and anyone else whit
wants to borrow money. If JOIN
Smith offers 5h per CEN interest
Uncle Sam can not expect TO borrow
at 5 per cent on the same kind o
security. Therefore, Treasury fIsca
agents keep well informed on tn
money markets and when the pric
of money, that is, the prevailing i'll
%terest rate, is relatively low IN
Treasury will declare an issue o
bonds or notes or certificates If III
debtedness. The money thus Dor
: rowed at the low rate will be de
voted to paying off the high price
loans.
The Treasury must exercise con
! siderable skill in these operations.
q must borrow a relatively sma
= amount of money at M time. Til
o price Of money is governed by III
law of supply and demand just q
/, the price of potatoes. Should til
Treasury try to borrow too much !
any n month or quarter the pric
of money would shoot up. The 10
LOT croMdiRg into Two years the eo'