The Farmville herald. (Farmville, Va.) 1957-current, 1959-09-01

Both the administration and the
Federal Reserve objected to this
resolution, and quite properly So.
Mills Spurns Compromise Proposal
Then new compromise" was
worked out which gave the Plesi-
dnet the authority to raise the in
tereSt rate for three years. and
softened the resolution into fairly
meaningless language. This va s
tentatively passed by the commit
tee. with five Democrats joining
the ten Republicans which meant
a IS to 10 vote. But Committee
Chairman Mills refused to introduce
The COMPROMISE and another argu-
ment started. Finally Rep Ikari
Dick proposed that the problem
be table I'd and this carried by a IA
TO II vote, with all but one Of
the Democrats. Rep. Harrison of
Virginia, voting for the motion
This means that the Treasury can
sell only obligations with less than
five-yeat maturity because the de
mand for long-term funds has al
ready driven the interest rate above
the four and one fourth per cent
level As a matter Of fact several
government bonds are now selling
at such a discount from their par
value that the yield is higher than
four and one fourth per cent
What this Means to the Economy
There are various unfavorable as
poets Of this necessary concentra-
ton in the short-term field.
First. it makes the MANAGEMENT
Of the public debt much more diff
ficult and means that the Treasury
must 90 into the market more fire.
qhcntly than otherwise would be ne
cesSarv.. This is disturbing to the
market.
Secondly. by selling only short
term paper the rates on Treasury
bills and notes will advance and
may we'll rise to above the long
term rate. This will make the carry
Ing charge Of the public debt higher
than il otherwise would be. and
higher than necessary.
Thirdly long term obligations are
attractive 10 savers and investors.
and to tie extent they are bought
BIZ these groups they represent a
mere transfer Of purchasing power
to the government Short-term paper
N bought primarily by the banks.
and is paid for by a bookkeeping
entry BY the banks TO the credit Of
the government. This is an increase
in the volume Of money, and hence
i inflationary This point was stress
ed at great length By the Trea
sury and the Federal Reserve be
tore the Ways and Means Com
mittee.
Fourthlys the action indicates that
VIC AZ nation are not willing to
put our financial house in order
and subject ourselves to the rather
rigid discipline Of free market
With the fear Of initiation already
widespread. this congressional move
toward initiation could scarcely be
more unfortunate or more untimely
Finally foreign holders Of bal
anceS n this country will tend to
withdraw their funds That means
stepping up Of gold exports. and
While We have far more gold than
necessary 10 meet present require
men's We can not be complacent
about anything approaching run
from the dollar
r and II Savings Bonds
The failure 10 be able to adjust
upward the rate OF interest on E
and H savings bonds is equally
serious Al present the return on
these OBLIGATIONS is three and one
fourth per cent. Or we'll below what
a saver may obtain on other Sc
curities of equal safety and liquidity
This Is the primary reason why
the redemptions of E and H bonds
for the past several months have
consistently been above the new
sales. The Treasury had proposed
lifting the rate on these E and H
bonds to three and three fourth per
cent. and making this rate apply