The Washington times., 1934-01-29
Business Debt Burden
High For Resources

not to mention undetermlna0le
billions in clear business proper
ties. There are $4,000 million
dollars, allowing generous third
for depreciation since the 1880
census, in furniture, jewelry and
strictly personal belongings, 5000
million dollars in livestock and
5000 million dollars in farm equip
ment and 5000 million dollars in
metallic monetary reserves.
Other odd billions might be
counted, but if we put the total at
10000 million dollars to be de-
Quoted, leaving the value of prop
critics underlying the private debt
at 100000 million dollars, it will
serve our purpose.
Debt Estimates Discounted
The outstanding debt, public
and private, of this country has
been estimated at more than
100000 million dollars, but this
writer has been unable to verify
any such figure. But verifiable
figures are sufficiently disturb
ing.
Combining Moody's estimates
for listed bonds and preferred
stocks, figures on mortgage in
debtedness compiled from the
Statistical Abstract of the United
States and Federal Reserve Board
reports on bank loans and dis
counts, and adding three-fifths
of the public debt as a just
proportion, we find that a mini
mum of 1865 1000 million dollars in
fixed charge paper is outStand-
ing against a property whose
maximum value is 5000 million
dollars less than the paper it
purports to secure.
The interest charge approxi-
mates 10000 million dollars a
year. In addition there is out
standing $1,000 million dollars in
listed common stocks upon which,
if innumerable fair return rul-
ings by the courts are germane,
there is an implied obligation of
more than 5000 million dollars
in annual dividends.
Add to these charges, 5000 mil
lion dollars as it's share of the
tax burden, and we find our
selves with a property optimis-
tically valued at 100000 million
dollars, against which there are
outstanding securities aggregating
25O,OO0 million dollars on their
face, with annual charges, ex-
press and implied, totaling 49,
900 million dollars annually,
which is nearly one-half of the
entire national income of $4,000
million dollars estimated by the
national industrial conference
board for the year 1888.
Cover Charge Is Per Cent
To put it another way, total
resources of 100000 million dol
lars have been capitalized on a
basis that compels us to make it
earn Is per cent per annum to
cover fixed charges before a
nickel is available for profit ac-
count, or a cent for amortiza-
ton.
Business men will see that
much besides 20 per cent deval-
uation of the dollar is necessary
if a proper ratio of debt to prop
cry value and income is to be es-
tablished. Even wiping out the
equities supposed to be repre-
sented in common stocks, if that
were fair, would not serve to re-
store the equilibrium upset by the
fantastic financing of the past 80
years.
There is nothing exactly new in
all this, as it was clearly set forth
and warned against 20 years ago
by that brilliant business analyst,
Louis D. Brandeis, now Supreme
Court justice, in his writings on
"Other Peoples Money" Indeed,
if warnings were worth anything,
we have been we'll forearmed, for
the germs of our economic disease
were isolated and it's climactical
course very precisely predicted a
century ago by that keen Old
World business diagnostician,
Honore Balzac.
RY |" re