The Key West citizen. [volume] (Key West, Fla.) 1879-current, 1936-12-02
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T:;i.rkaR WA ELLINGTON

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to arrive at a balanced budget
as soon as possible. Some of the
so-called nuisance taxes, which
cost more to collect than they
yield, will be abandoned. Improv-
ed b1iness conditions, resulting in
better collections of taxes, is tax
en- to promise greater yields in the
new year. Besides, a rational
reduction of emergency agencies
is expected although not on the
wholesale scale that some con-
servatives would like to see.
The present fiscal year, 1897,
will see an encouraging progress
toward a balance of the Federal
budget and some observers be-
lieve that balanced budget is
possible in the fiscal year begin
ming next July. The key item is
the amount necessary for unem-
ployment relief. IL business con-
tinues to improve and to take up
the emr,oyables, the government
viii be relieved of a burden that
the President has plainly declared
It viii not throw down until priv
ate enterprise provides oppOrtun-
tiles for employment. There is
Something to be learned in figures
rejecting the growth of Federal
revenue from slightly more than
three billion dollars in 1884 to six
billion dollars in the present fiscal
year, an estimate recently made
and taking into consideration the
faster tempo of business this fall
Inasmuch as government eX-
penditures, exclusive of the bOnust
haze lowered around seven billion
dollars a year for the past three
fiscal years. it is calcu. ated that
before the beginning of the next
Is cal year in July prospects Will
be bright Cor something like a
balance In the 1888 fiscal yea.
This will occur only if relief eX-
penditures can be reduced around
q billion dollars from the figure
for the present twelve-month Pc
Rod. This depends, almost en-
tirely, upon the course of business
activity within the next six months
and the absence of any disaster,
like the drought, next year.
The President has instructed
administration financial agencle9
to study the effect of foreign i'll
vestments in this country and the
Federal Reserve Board has init
mated that it will soon increase its
reserve requirements for member
banks. This doesn't mean much
to the average reader. We are
not certain that we can make it
clearer but one should remember
that business in this country is
largely matter of credit. The
booms that wreck our economic
structure have not been caused
by excess money hut by excess
credit, which feeds speculation un-
til a crash comes. Banks are per-
mitted to lend money freely but
they are required by law to carry
certain reserves in relation to
their deposits and this has ten
dency to limit the credit that they
can otherwise extend.
/ Under present rules, issued last
August, New York and Chicago
banks are required to keep re-
! serves9of. 1875 percent OF demand
(, deposits, banks in reserve cities
keep Ii ger cent and country
banks keep 10.5 per cent. The
reserve rules were just half Of
these percentages before last
August but the move was made
to eliminate about a billion and
half dollars of excess reserves,
which might, otherwise, have serv-
; ed as basis for injurious credit
expansion. Since that time, how
ever, due to foreign purchases and
other causes, the excess reserves
! have continued to gain so that
few weeks ago the excess was es-
timated at $2,27O,000,OO0. Chair
man Eecles considers this amount
high and officials say that $780,
100000 of excess reserves are am
pie to provide low interest rates.
Understanding that excess re-
serves ere idle funds, over and
above the required reserve to
protect deposits and that econom-
lists estimate that every dollar OF
such excess can support from IS
to $40 of credit and you can see
for yourself that a speculative
mania has fertile soil. To guarc
against runaway initiation of cred
it the Reserve Board attempts tc
control the exes.s by raising IL
required reserves. Under exist
inc law the s.oxrar ran 10 exer.siS-