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INFLATION POTENTIAL Mav 28. 1945 Copies of bound copies were given to the following; President Truman — 5/29/45 Brown Bound Harold Smith — 5/30/45 Gray Bound Judge Vinson — 6/7/45 Gray Bound Charles Ross — 6/8/45 Gray Bound Phillip Murray — 6/5/45 Gray Bound (Mailed) General Somervell -- 6/5/45 Gray Bound (Mailed) Mr. Thurston — 6/5/45 Gray Bound Major Parten — Sent to Europe through Mr. Adams (Unbound) TAIL'S I FEDERAL WA.HTIME BUDGET Total Funds Raised (in billions of dollars) Period From Taxes From Borrowing Total Taxes as Percentage of Tota], Fispal year ending June 30 1940 5&1+ 2.5 7.9 68,1+ 191+1 7.6 6,9 11+.5 52.1+ 191+2 12.8 a,8 5U.6 37.0 I9I+3 22.3 62,9 85.2 26.2 19^ l+l+.l 61.6 105.7 1*1.7 191+5 ¿+5.7 1+7»7 93.Ì+ 1+8.9 19U6 1+1.2 39.1+ 80.6 51.1 179.1 21+2.8 1+21.9 1+2.5 191+0-19Ì+6 5- 28- 1+5 c CHART I FEDERAL WARTIME BUDGET TOTAL FUNDS RAISED 422 BILLIONS BILLIONS OF DOLLARS IOO 1940 1941 1942 1943 1944 END OF FISCAL YEAR 1945 1946 1940 - 46 TABLE II THE FEDERAL DEBT Deficits from War and Depression (in billions of dollars) Period 1/ Dates Interest-bearing Debt Change Outstanding During Period End of Period World War I I9I6-I919 + 24.2 25.2 Seduction in »Twenties 1919-1930 - 9*3 15.9 Early Depression 1930-1933 + 5.5 a.4 Relief and Recovery 1933-1940 + 26*5 47.9 World War II 1940-1945 +200.9 243.8 1945-1946 + 39.4 288.2 l/ All figures apply to June 30 dates with the exception of 1930 which applies to Uarch 31 * 5-28-45 CHART IL THE FEDERAL DEBT DEFICITS FROM WAR AND DEPRESSION BILLIONS OF DOLLARS BILLIONS OF DOLLARS 300 300 250 250 200 150 00 DEFICIT FROM WORLD WAR I D E F IC IT CARRIED OVER FROM WORLD WAR I D E F IC IT FROM le>EIPMIE§§fl®K) 50 0 1919 1930 JUNE 3 0 JUNE 3 0 193 MAR 1940 JUNE 3 0 TABLE III RJ3LIC AîüD PRIVATE DEBT (in billions of dollars) End of Calendar Years 1929 1933 191+0 19I1I+ 191+5 196 177 200 375 1+20 35 1+8 73 250 296 Federal 18 28 53 233 280 State and Local 17 20 20 17 16 l6l 129 127 125 12l+ Corporations 93 82 77 77 76 Other 68 hi 50 IjS 1+6 Typfci; of Debt Total Public Private CHART HI PUBLIC AND PRIVATE DEBT B ILLIO N S OF DOLLARS BILLIONS OF DOLLARS 500 1 500 PUBLIC DEBT 400 - 400 3 00 - 3 00 c FEDERAL 200 STA TE - 200 - 100 AND LOCAL PRIVATE DEBT 100 CORPORATIONS OTHER 1929 1933 1940 1944 END OF CALENDAR YEARS 1945 TABLE IV s f INFLATION POTENTIAL IN LIQUID ASSETS (in 'billions of dollars) End of Fiscal Years 1920 1 1929 Demand 18.6 21.k Time 15.8 U.S. Gov’t. Total 1940 19^4- I9U 5 191+6 13 .2 30.5 57.9 72.5 86.0 28.6 21.7 27.1+ 35.7 1*3.7 51.7 0.3 0.4 0.8 0.8 19.5 16.0 li*.0 3U.7 50.h 35.7 58.7 113.1 132 .2 151.7 4.1 3.6 1+.8 6.7 20.9 25.3 28.3 U.S. Securities I8.9 10.0 10.3 11.7 72.9 9 1.2 102.3 Grand Total 57.7 6l*.0 50.8 77.1 206.9 21*8.7 282.3 Type of Asset 1933 Deposits “Currency 1( Includes holdings by individuals, unincorporated, business and corporations. The figures exclude holdings by Government trust funds, Federal Reserve Banks, coimneroial banks, mutual savings banks, insurance eompanies, and savings and loan associations. 5-28-1+5 CHART E t INFLATION POTENTIAL IN LIQUID ASSETS DEPOSITS, CURRENCY, AND U. S. SECURITIES HELD BY INDIVIDUALS AND NONFINANCIAL CORPORATIONS BILLIONS OF DOLLARS BILLIONS OF DOLLARS 300 300 250 250 DEPOSI TS 200 o 200 150 150 CURRENCY 100 10 0 SECURITIES 50 0 1920 1929 1933 1944 1945 END OF F IS CA L YEAR 1946 TABLE V SOURCES OF POTENTIAL CLAIMS ON UNITED STATES PRODUCTION 3Y FOREIGN COUNTRIES (in billions of dollars) End of Calendar Years 19l*0 I9Ì1Ì+ 191*5 Gold held abroad 7.0 10.6 11.5 Gold under earmark in U.S. 1.8 3.9 5.0 Official dollar balances 1.3 3.0 3.U 10.1 17 .5 19.9 U.S. currency held abroad 0.3 0.5 0.6 Other Short-term assets 2.5 2.3 2.6 Long-term assets 5.8 6 .1* 6 .1* 8.6 9.2 9.6 Lend-Lease "commitments” 8.0 5.0 U.N.R.R»A., unused balance of U.S. contributions 1.3 0.7 0.6 0.5 o»5 0.6 9.8 6.2 19.3 36.5 35.7 Source Monetary Reserves Total Private Assets Total Gifts and Loans Export-Import Bank, unused loan commitments-' and autjporized lending capacity Total Grand Total 5-284+5 CHART Y SOURCES OF POTENTIAL CLAIMS ON UNITED STATES PRODUCTION BY FOREIGN COUNTRIES B ILLIO N S OF DOLLARS B IL L IO N S OF DOLLARS 40 40 GIFTS A N D LOANS 30 PRIVATE ASSETS 20 MONETARY RESERVES 1940 1945 DEC. 31 DEC. 31 — I 0 NOTES TO TABLES Table I "Total Funds Raised" is defined to include (1) net receipts, general and special accounts, and (2) the increase in total interest-bearing direct and guaran teed securitiest Note that for any single year expenditures may fall short of or exceed fpnds raised, depending on changes in Treasury balances. Table II <fcti interest-bearing direct and guaranteed securities are included* Table III The table shows the gross debt, public and private. The figures for 1929 to 19i*0 are from Survey of Current Business, Department of Commerce, July 19iiU$ figures for later yeafrs are estimated. Table IV Holdings by individuals, unincorporated business and corporations are in cluded. The figures oxclude holdings by Government trust funds, Federal Reserve .Banks, commercial banks, mutual savings banks, insurance companies, and savings and .oan associations. Demand deposits include "adjusted demand deposits” only; they exclude interbank and U.S. Government deposits, loss cash items in process of collection. Table V The estimates of foreign monetary reserves and assets in the United States for 19U5 are based on the following assumptionst (a) that the rate of U fS* disbursements abroad remained the same as in I9I4U until V-E (May 19^5)» and de clined by approximately one-third thereafter until V-J (June I9I+6)} (b) that the increase in claims by foreign countries is distributed between short-term balances, and earmarked gold in the same proportions as in the preceding years. Changes in long-term investment are also possible, but they would result in a corresponding decline in short-term claims and/or earmarked gold; (c) that the rate of gold pro duction resulting in increases in foreign gold holdings remain the same. The estimates for lend-lease have been derived on the basis of the fol lowing data? During 19UI+ lend-lease expenditures exceeded 1 billion dollars a month. On the assumption that the authorities anticipated correctly the end of the war in Europe and contemplated a curtailment thereafter, the figure of 8 billion appears reasonable* The figures for the subsequent dates were based upon tentative commitments made vis-a-vis the United Kingdom, France, the Netherlands, and Belgium, the larger part of which should be liquidated by the end of June 19t|6. - 2 - With respect to the data for U.N.R.R.A. it is assumed that almost onehalf of the contribution of the United States will be used in 19h5* The table does not include any estimates for dollars afeich would be sup plied by the International Monetary Fund and the International Sank, since it is unlikely that these institutions will start opérations before June I9I4. 6 . The maxi mum amount which would become available from these sources over a period of four years after the beginning of operations, is estimated at 10 billion dollars (6 billion through the Bank, 2.9 billion through tho utilization of the United States* quota in the Fund, tho remainder through the conversion of the Fund’s gold hold ings into dollars,). In general, it should bo kept in mind that the estimates refer only to those potential claims of foreign oountries or United States production which are inflationary, i.e. are not offset by a corresponding inflow of goods and services into the United States, such as imports. They are maximum figures. For instance, it is extremely unlikely that foroign countries will be willing to make substantial use cf their gold reserves for purchases in the United States.