Detroit evening times., 1945-03-22
BEHIND
The NEWS
By Paul
Mallon

AZ
w What Will happen TO those
war bonds you are so patri-
otically buying and should be
storing away, was threshed out
between the treasury and finan-
cially wary senators IN the debt
increase lhearings-but not gen.
orally observed.
Treasury Undersecretary Bell
agreed with the senators that
the government must have. and
will get, whatever controls are
necessary to maintain the full
face of all war loans.
The government cannot afford
to let them drop 10 So this time,
as after the last war, simply
because the whole financial
equilibrium Of the country is,
this time, ineXtricably involved
in the bond value balance. The
banks, for instance, own about
SOC. 900, 100000 of the debt and
will get about S20,000,000,000
TO S25, 900, 100000 more Of it an
nually.
VIE government simply cam
Il not afford 10 let the bonds
drop without letting the banks
drop, and these Institutions are
indeed now guaranteed by the
government (FDIC).
To fulfill its necessities In this
respect, Mr.. Bell laid out a
course of action, under sena-
torial promptings (from Byrd,
Hawkes. and Milliken mostly
which carries sound eXpecta-
tions.
Rather large refunding oper-
ations will have to be conducted
to pay those people who want
to cash in TO buy autos, radios,
etc. New bonds will be issued 10
raise that amount of cash. To
handle this operation the gov.
eminent wiilhave to support
the bond market ("manipulate
it, is the way one Senator
put it,
A bill is now being passed
cutting the gold reserve behind
the dollar to 25 per cent, which
will give the Federal Reserve
System the tidy bookkeeping
credit of S36,000,000,000 for
such support.
TIIS should be enough (they
L all agreed) If the govern
ment cuts expenses and keeps
taxes up. (Messrs. Wallace,
radicals and Keynes theorists,
please noteO In short, the gov
ernment can no longer afford
freely to finance domestic and
world WPAs and keep faith
with the people on the bonds
they hold, but must curtail and
watch its financial step in or
der that high taxes ma" be suf-
ficient TO support government
with out further deficit
financing.
Only wise and thrifty man.
agement is permitted by the ex-
pected debt of 1922 600, 600, 900
June. 1946) and every dollar
of debt adds difficulty to the
problem.
MIR. WALLACE and his
WI friends should remember
government bonds and the faith
of the government pledged TO
the people who bought them,
when their free spending "hu-
name policies are proposed.
T he postwar reconversion
must be handled with similar
skill and care because wide
spread unemployment would
force the government to eX-
penditures which would add to
its inability to meet the bond
payments soundly, and TO keep
enough business going to pay
the interest on the debt.
II these reasonable projects
fail, then Mr.. Bell seemed TO
agree with the senators that the
Federal Reserve System will
have TO issue currency to pay
the expenses of government.
Undeed, Senator Byrd, argued,
not without grounds. that if the
government is to buy all bonds
the inflationary results will be
the same as issuing money!
But they both meant that II
the government cannot make
things add up, il will have 10 go
into further and further infla-
ton, higher and higher prices,
cheaper and cheaper dollars.
EROM this, you can see there
l. is no chance whatever that
your war bond cannot be met
100 cents on the dollar The
only chance of depreciation is
not the bond, but the dollar. The
postwar obligation of the gov
eminent, in keeping faith with
the people for their bond pur-
chasing, therefore, is to protect
and stabilize the value of that
dollar.
You bought the bond, at say,
current price levels. 1t cost you
a certain amount of work. The
pnVprnrpept will hayo hrolyan