Finance

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Abstract

Finance T Seventy-fifth Congress, now in session, passed a bill approved on January 23, extending until June 30, 1939, the powers conferred upon the President by the Gold Reserve Act of 1934 which granted him authority to reduce the gold content of the dollar by not more than 50 percent, as originally provided by an amendment to the Emergency Farm Relief Act of 1933. The same bill provided for a similar extension of section 10 of the Gold Reserve Act of 1934 which provided for the establishment of a stabilization fund of $2,000,000,000 by the Secretary of the Treasury in connection with exchange stabilization operations. Of more direct interest to the money market was the President's Budget message to Congress, submitted on January 8, in which it was reported that "the 1938 Budget is in balance, and, except for debt reduction of $401,515,000, it will remain in balance even if later on there are included additional expenditures of as much as $1,537,123,000 for recovery and relief." Total expenditures for the fiscal year 1938, exclusive of directand work-relief funds for which a supplemental request is to be presented to Congress later, were estimated at $6,158,000,000. Total receipts for 1938 were forecast at $7,294,000,000, an increase of 25 percent over the estimated total for 1937. It is estimated that the gross public debt on June 30, 1938, will be about the same as at the close of the fiscal year 1937, without taking into account any changes which may occur as a result of the Treasury policy in holding as "inactive" future acquisitions of gold. Stock prices have moved upward during January, with the most pronounced rise in industrial shares which reached new high levels for the recovery. Rail and utility stocks also advanced but tended to be less firm after the middle of the month. Bond prices have remained firm, with continued low interest rates sustaining the high-grade issues, and further improvement in corporate finances tending to strengthen issues of lesser merit. During the 4 weeks ended January 20, excess reserves of member banks increased by approximately $250,000,000 to a total of $2,130,000,000. This rise followed a decline of somewhat larger proportion during the preceding 4-week period, and has resulted largely from a return flow of $341,000,000 of currency to the member banks after the holiday season. Whereas money in circulation increased steadily during the first 3 weeks of December, while member-bank reserve balances showed a steady decline, these movements have been reversed since that time. That this seasonal correction is virtually completed is indicated by the fact that during the week ended January 20 the rate of decline of money in circulation, as well as the rate of increase in member-bank reserve balances, was not especially pronounced. Daring the past year there has been a steady upward movement in both the volume of money in circulation and in the volume of bank debits. These changes reflect the increased demands arising from the general improvement in business activity.