Evening star., 1935-12-15
PRESENT j. S. DEBT.
IS DECLARED SAFE.
Plans for Future Seen as
Only Possible Peril to
Confidence.
BY DAVID LAWRENCE.

enLy DlIuOnS IN puDHC QepG COuIu US
carried, but no bankers have arisen
to confirm that view today.
The answer to the question is to ask
another.
Winthrop Aldrich, president Of the
Chase National Bank, regarded as
among the progressive bankers of the
country, answers thus:
1.-The question of how much debt the
United States Government could safely
incur is not one which any banker
should venture to answer with definite
figures The answer would depend
both on moral and material considera-
tions.
Intent Is Great Factor.
"a government which has repudi-
ated its obligations cannot safely incur
debt to the same extent as govern
ment which has always faithfully met
its obligations.
"a government which is willing and
able to tax the great body of the
people will have far better credit than
a government which tries to delude
itself and its people into the belief
that only the wealthy need to pay
taxes, despite the fact that the esti-
mates of its own treasury reveal that
confscatory taxes on large inheritances
and large incomes will bring in rela-
lively little additional revenue.
"A government which is using bar
rowed money for vitality necessary pur-
poses, prudently and carefully, and
which clearly intends to borrow only
what it absolutely must have, can
safely borrow more than a government
which is spending borrowed money
recklessly."
Confidence Is Keystone.
The foregoing was made in public
speech by Mr.. Aldrich and it prob
ably represents what might be called
the restrained and cautious opinion
of the bankers of the whole country,
who, after all, are the ones who must
judge whether to put thei depositorS
money into Government bonds.
President Roosevelt himself said to
Congress in 1888: TOO often liberal
governments are wrecked on the rocks
Of loose fiscal policy" Thus, the ques-
ton of how much an administration
can borrow depends on how much con-
f1dence the people have in the fiscal
policies of that administration.
At present the President is working
on the budget figures to be announced
in January. He knows full well that
his budget message will be the most
important document that could come
out Of Washington in the year 1896.
For on the pledges made to produce
a program looking toward balanced
budget and curtailment of expendi-
ture will depend how much confidence
the banks and financial institutions
generally are going to have in the
bonds to be issued.
Forced Loans are Peril.
1t is easy enough to say that the
banks do not care or that bonds
can be forced upon the banks or that
the banks can take their bonds to
the Federal Reserve banks and get
cash at any time. The fact remains
that when forced loans start, conf
dence breaks down. That was the
experience in European countries after
the war, and it is a natural reaction
anywhere.
The coming session of Congress will
see Ssaults on public confidence in
the form of efforts to issue printing
press money to pay Government ex-
penses instead of bonds. Lots of
persons insist that the Treasury has
issued fiat money already because
none of the currency today is re-
deemable in gold. 1t rests on an i'm
piled promise of the Federal Govern
ment to set aside enough gold to take
care Of possible wish to exchange
paper money for gold or silver But
as long as the Government will not
redeem in gold, the paper money out
standing cannot be considered on the
same basis as it was before April,
1888, when all gold was impounded
for Government use.
There is no danger of loss of con-
f1dence as long as small amount
of paper money is printed. For today
there is outstanding only about S.
ooo,o0o,oo0 in currency, whereas the
Government itself holds about $lO,-
0O0,000,000 in gold.
Present Debt Is Safe.
But when the Government starts
printing money far beyond a proper
ratio or when it refuses to redeem for
metal even in the face of a public
demand, then crisis is precipitated.
Today the public debt is safely
within limits that financial institu-
tions of the country accept as rea-
sonable, but even it will be regarded
as unsafe if the Federal Government
does not soon show the people where
1t is going to get revenues to retire
the debt and pay interest charges, or
II the Federal Government does not
call a halt to the big deficits and
show distinctly downward trend,
What has happened thus far is not
dangerous. The credit of the United
States today is sound and Govern
ment bonds are sound-reasoning only
on what has happened to date. AS
to the future, the talk of $55,o00,-
100000 public debt revived by the
President himself has been diSquiet-
Ing, for it has been interpreted as
meaning considerable more spending
and more deficits and not a course of
economy for years to come.
Price Zoom Held Unlikely.
Whatever it does mean, the answer
to the question of how much can be
borrowed will never be made on the
political stump or in public speeches,
but in the reaction of investors and
depositors some day when they make
up their minds that the spending
policy of the Government has passed
the point at which it can be re-
Yersed effectively.
It is worth noting that banks and
insurance companies cannot lose by
imitation, for they pay out in in
flated dollars exactly what they re-
ceived originally N deposits. But
when the depositors or investors at
tempt to turn their cash into pur-
cI1ases, they may find, as did the
people of Germany in 1928, that the
cash udlI T1nt hiiv the same amount