The Key West citizen. [volume] (Key West, Fla.) 1879-current, 1934-01-09
Budget Needs, Dollar Value
--UncLeSan1 s Balancing Task
BY FRANK l. WELLER
6By Associated Press)


toll Hill.
On January the RFC gold4.
purchase price had completed it's
twelfth day at $34.06 an ounce.
compared with the statutory
$20.67. The previous high had
been $34.01 for an even longer
time on December z. Between the
two dates the gold value of the
dollar declined from GAL cents to
63.5 cents.
Gold Content Compromised
With unprecedented peace-time
borrowing ahead, there seems to
be more sentiment among COM
servatives and inflationists alike
for the president to call their
spokesman together on common
ground--namely q compromise on
the gold content of the dollar.
They say that to remove uncer-
tainty would bring ''fear-frozen"
deposits out for investment.
Senator Thomas of Oklahoma
says there is a possibility of Mr..
Roosevelt cutting the gold value
of the dollar to SO cents by in
creasing the price of gold to
$41.34 an ounce. For the sake of
stability, James P. Warburg. a.
former monetary advisor to the
president, and other champions of
orthodox money" have indicated
willingness to go along with a 3D.
cent dollar.
Economy As Credit Guarantee
At present one of Mr.. Rose
velt's closest advisers appears to
be Prof. George F. Warren who
would tie the purchasing power of
the dollar to the rise and fall in
the general commodity price level.
The presidents message to con-
gress was interpreted as indicating
he had no intention Of steering
away from that course.
Rather, it appeared, he sought
to entrench it by making federal
statutory economy a guarantee for
government credit. He hoped to
borrow more by keeping normal
expenditures at minimum. Some
believe he hoped, too, to head off
congressional action for an in
crease in veterans compensation
or full payment of the bonus
which might necessitate some out
right initiation.
The approaching congressional
campaign is considered a strong
inducement for those who will be
candidates to advocate payment of
the bonus.
Profit From Initiation
In that event, some initiation
lists say, Mr.. Roosevelt could de-
clare q 10-cent dollar, impound a
treasury profit" of $4,000, 000,-
900 on reserve bank gold and is
sue $s.OOOYOOO.OOO of greenbacks
against it.
There is q much different atti-
ltude at the treasury. In the first
place, 1t is going to borrow &c.
900, 0OO,0 and not $4,000, 0O0,-
600. That other $4,000, 0OO, 900
represents maturities which usual
ly are wiped out by trading the
bondholder new paper for the old.
Nor is it anticipated that the
$4,000, 100000 will be borrowed
all at once. The practice is to
issue bonds. notes or bills as
money actually is needed.
The last issue was for $780,
600, 900 and was oversubscribed
three times at Ia percent. The
public" is chiefly banks and cor
porations with idle surplus re-
serves. Such reserves are said to
be stacked high ia financial insti
tutIons for lack of commercial
outlet.
How Banks Buy Bonds
Banks buy government bonds by
subscribing at the treasury and
ear-marking currency in their own
vaults for government account. It
IS drawn upon as needed, FREE
! quently months after it was sub
scribed.
un December 81 the federal re-
sefSa banks had 50. 49,, 900, 900
of government securities, nearly
j two billions more than in Decem-
Der. 1922, and member banks had
Wen over an additional $1,00O.-
0OO.000. They are counted upon
heavily to support any new issue
lest failure to absorb il lessen the
value Of those they already own.
Federal reserve member banks
IN 80 cities on December % had
SIC, ss6. 00O. 900 Of demand de-
posits and $4,3s9. 900. 600 Of time
deposits and $s25, 00O. 900 Of gov
eminent deposits. Money in cir
eulatien totals around IS. 500.
0tl0. 900.