Evening star., 1940-06-28
Giant Arms Costs
Cause No Alarm
In Wall Street
u. S. Dollar Remains
Strongest Currency
In World
BY GEORGE T. HUGHES.
special Dispatch to The Star,


special Dispatch to The Star.
NEW YORK, June 28.-Despite
the defense appropriations of rough
ly $4,000, 100000 already made and
the prospect of still more to come,
the financing Of the rearmament
effort creates little concern.
The debt limit has been raised
$4,000 600, 900 from the original $45.-
600 900 900 mark and no alarm is
sounded. 1t is taken for granted,
and correctly, that the country can
carry the load.
The dollar is the strongest cur
rency in the world. and dollars are
preferred to all others. The Swiss
franc is perhaps second, but the
leadership the British pound once
held undisputed has passed, con-
ceivably never to be regained.
This is all the more significant
in view of all the doubts so widely
expressed the last four or five years
about the size of the debt and the
investment status of the evidences
of that debt. Yet United States
Government bonds, though fiuctu-
ating in market price from time to
time. hold firmly to their position
as the worlds safest and most de-
sirable investment.
Opinions Differ.
Now, whether this confidence Is
based on our huge store of gold or
our great natural resources or on
the character of our people is a
matter on which differences of opin-
ion are legitimate OF one thing.
however, all may be sure. 1t has
been the imports of gold which
have swelled bank reserves and so
created the deposits which have
held Governments" at their high
price level. Incidentally it has
held money rates down to fantasti-
cally low levels. This is an unde-
sirable situation in some respects,
but 1t eases the distribution of new
Government obligations.
1t is not only that there is a ready
market for the new bonds or notes
that will have to be foated for the
Treasury, but the banks are in a
position to extend credit to almost
any amount to private corporations
for plant expansion.
Business loans in this weeks
statement of the reporting member
banks are up $10,000000 on the
week, but this is an insignificant
sum in proportion to the credit
available. The gain on the year is
S564,000, 900, but that. too, is negligi-
BILE in comparison with the posi-
bilities. The banks are not simply
willing. they are eager to put some
Of their unemployed credit to use.
The other side of the picture, of
course, is the increased taxation
that will go along with the in
creased Federal expenditures, and
which in fact is necessary not alone
to hold down the total of the bor-
rowings but to prevent the inf1a-
ton that unrestricted financing by
loans would invite. A great deal
of concern has been expressed as
to this outlook.
Imitation Avoided.
However, the fact is that the
warning governments have had con-
siderable if temporary success in
avoiding imitation. The technique
Is better understood now than ii
was Is years ago. Not only is taxa
ton imposed to the limit of en-
durance, but it is made difficult for
the citizen to spend the income the
tax collector leaves to him. Ra-
tioning is resorted to not only for
the sake of eking out a limited
supply of necessities but for ra-
tioning for its own sake.
There will be no new million
aires created by this war, that is
If the program is followed, and
there will be no buying of two
pianos when there is room in the
house for only one and no riding
around in taxicabs all day Just to
get rid Of ones money. Both these
things happened in 1916 before the
United States entered the last war.
Incidentally it ought to be re-
membered that this is the way
some of the proceeds of those bill
lion-dollar war bets, now defaulted,
were used. The United States Gov
ernment loaned the money to the Al
lies, who spent it in the United
States, and the private recipients,
employers and employees were free to
use 1t as they saw At and did. That
can't happen here this time.