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CAUTION: For the convenience of the Press only, release on delivery probably about 11 A.M., E.S.T., Tuesday May 16, 1939. SUMMARY OF STATEMENT SUBMITTED TO THE TEMPORARY NATIONAL ECONOMIC COMMITTEE BY :LAUCHLIN CURRIE, ASSISTANT DIRECTOR DIVISION OF RESEARCH AND STATISTICS, BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM, AT THE HEARINGS ON SAVINGS AND INVESTMENT,. May 16, 19^9. Dr. Currie presented a series of charts and tables which indicated what our national savings have been in recent years, how they have been invested or offset, and the relation of such investments to the national income. Among the conclusions to be drawn from these charts are: Gross savings amounted to about 19*per cent of the.gross national income during the 1920*s. In 1937 the same figure had been reached, 19 per cent. Gross national income may be defined as the sum of the final selling prices of all goods and services produced in a given year. Net national income is the same figure less an allowance for depreciation and depletion. If this ratio of 19 per cent prevails in the future when we push gross national income up to one hundred billion dollars, which means a net national income of around 90 billions, we will have to offset some 19 billions of savings by plant expenditures or other outlays if 3 subsequent decline is to be avoided* Expenditures which absorbed 01* offset savings remained fairly stable from 1923-1928 despite the steady rise in national income. That rise may be attributable to relatively more consumers1 expenditures nourished by speculation on the stock market* During the 20*s expenditures for plant and equipment comprised about half of the outlet for savings. The same ratio obtained in 1937. But during the recovery after 1933 expenditures for equipment increased more rapidly than those for plant structures. By ,1937 equipment expenditures almost levelled 1929. It is perhaps legitimate to infer from these figures that our industrial equipment has been relatively well maintained* Expenditures for manufacturing"plant and equipment showed a remarkably close relationship to the volume of industrial production throughout the entire period studied. They offset 15 per cent of our savings in 1925, 20 per cent in 1929, and ag<iin 20 per cent in 1937. The borrowings of state and local governments provided an outlet for nearly one billion of our savings in most years of the 20fs. This outlet collapsed with the depression. The outlets provided by the Federal Government increased sharply. Combining both Federal and local government outlets for savings, the total was about the same in 1925, 1929, and 1937. When inventories accumulate, they provide an offset to savings just as do expenditures for plant and equipment. In 1925 this outlet accounted for 9 per cent of our savings and in 1937. for 28 per cent. Release No. S-12 - 5/15/39 - 2 - Release No. S-12 Another substantial offset to savings is residential housing. Combining this with expenditures for the plant of non-profit institutions (churches, country clubs, and so forth), it appears that this outlet accounted for 33 per cent of our savings in 1925 when the post-War housing boom was going full blast, but only 11 per cent in 1937. Expenditures for the plant and equipment of electric utilities appear to be influenced by the relation of kilowatts produced to generating capacity. The 1923 relationship was not regained until 1936. Railroad equipment expenditures in 1937 approximated the 1929 level but fell considerably* short of the level of the early 20*3. Such expenditures appear to be predominantly affected by the supply of rolling stock in relation to peak car loadings. Expenditures for agricultural plant and equipment in 1937 were up to the level of the late 20*s. Outlets for savings through consumer credit (instalment buying, and so forth) increased rapidly in the 20's and again from 1931937. In the latter year the volume of consumer credit outstanding exceeded the 1929 level. —-oOo—- SUPPLEMENTARY TABLE I-a PLANT AND EQUIPMENT EXPENDITURES BY TYPE OF BUSINESS. TOTAL (In millions of dollars) Total 1918 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1939 1934 1935 1936 1937 1938 6,860 8,034 5,"095 5,666 7,-765 .7,542 8,069 8*934 8,609 8,749 10,045 8,307 5,145 2,834 2,433 3,459 4,390 5,995 7,516 5,462 Railroads 374 630 550 434 1,077 901 728 883 751 673 840 865 360 164 101 218 166 306 525 238 Electrical Power Telephones Transit Other Utilities 268 447 288 408 738 844 787 718 738 701 793 855 555 265 120 137 179 269 424 403 132 205 230 266 320 386 387 408 399 460 620 616 411 255 167 180 195 250 349 319 123 162 100 151 180 133 123 116 130 135 135 124 132 61 46 78 117 109 101 83 155 181 137 236 245 355 300 380 427 348 369 298 243 141 72 77 92 120 150 120 Mining Agriculture and Manufact. 2,987 3,412 1,951 2,073 2,581 2,265 2,625 3,045 2,757 2,962 3,490 2,449 1,402 921 993 1,445 1,810 2,483 3,039 2,013 1,128 1,197 488 539 695 665 758 759 818 869 962 765 446 225 289 409 637 786 970 820 Commercial and Miscellaneous, 1,693 1,800 1,351 1,559 1,929 1,993 2,361 2,625 2,589 2,601 2,836 2,335 1,596 802 645 915 1,194 1*672 1,958 1,466 SUPPLEMENTARY TABLE I-b PLANT AND EQUIPMENT EXPENDITURES BY TYPE OF BUSINESS PLANT (In millions of dollars) 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 Total Railroads Electrical Power 2,982 3,558 2,344 2,536 3,137 3,183 3,456 4,031 3,960 3,942 4,365 3,683 2,166 1,188 874 1,102 1,245 1,628 2,175 1,816 143 243 212 175 361 382 373 492 447 438 503 521 284 126 85 122 83 139 188 117 161 268 170 237 421 473 433 388 391 364 397 419 266 125 55 62 79 116 182 173 Telephones 64 109 90 107 143 177 192 206 196 227 328 310 154 80 41 43 46 63 100 88 Transit 63 82 59 85 74 56 52 51 77 90 82 85 69 29 21 30 40 45 39 41 Other Utilities 113 122 93 157 166 238 199 239 285 227 256 186 174 100 50 51 63 81 98 78 Mining Agriculture and Manufact. 1,363 1,627 930 880 950 821 935 1,196 1,074 1,137 1,335 945 482 378 374 509 555 708 970 763 490 450 190 250 287 275 282 282 284 278 278 220 155 75 105 120 170 200 230 210 Commercial and Miscellaneous 585 657 600 645 735 761 990 1,177 1,206 1,181 1,186 997 582 275 143 165 209 276 368 346 SUPPLEMENTARY TABLE I-c PLANT AND EQUIPMENT EXPENDITURES BY TYPE OF BUSINESS EQUIPMENT (In millions of Dollars) j Total 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 3,878 4,476 2,751 3,130 4,628 4,359 4,613 4,903 4,649 4,807 5,680 4,624 2,979 1,646 1,559 2,357 3,145 4,367 5,341 3,646 Electrical Railroads | Power 231 387 338 259 716 519 355 391 304 235 337 344 76 38 16 96 83 167 337 121 107 179 118 171 317 371 354 330 347 337 396 436 289 140 65 75 100 153 242 230 Telephones 68 96 140 159 177 209 195 202 203 233 292 306 257 175 126 137 149 187 249 231 Transit Other Utilities 60 80 41 66 106 77 71 65 53 45 53 39 63 32 25 48 77 64 62 42 42 59 44 79 79 117 101 141 142 121 113 112 69 41 22 26 29 39 52 42 Itining Agriculture and Manufact. 1,624 1,785 1,021 1,193 1,631 1,444 1,690 1,849 1,683 1,825 2,155 1,504 920 543 619 936 1,255 1,775 2,069 1,250 638 747 298 289 408 390 476 477 534 591 684 545 291 150 184 289 467 586 740 610 Commercial and Miscellaneous 1,108 1,143 751 914 1,194 1,232 1,371 1,448 1,383 1,420 1,650 1,338 1,014 527 502 750 985 1,396 1,590 1,120 SPPPLEKEETARY TABLE V COMPOSITION OF INCOME-PRODUCING EXPENDITURES THAT OFFSET SAVING, AVERAGE 1923-1929 Government Plant and Equipment Mining and Manufacturing Railroads and Utilities Other Housing and Non-profit Institutions Foreign Bal. Change in Consumer Credit •Change in Inventories Total Millions of Dollars Percent of Total 506 8,530 3.2 53,3 2,818 2,504 3,208 17,6 15.6 4,780 429 730 1,033 29.9 2.7 4.6 6.5 16,008 100.0 20.0 SUPPLEMENTARY TABLE y-b COMPOSITION OF INCOME-PRODUCING EXPENDITURES THAT OFFSET SAVING, 1956 Millions of Rollars Government Plant and equipment Mining and manufacturing Railroads and utilities Other Housing and non profit institutions Foreign "balance Change in consumer credit Change in inventories Total Percent pf Total 3,939 5,995 26.6 40.6 2,483 1,054 2,458 16 #8 7.1 16.6 1,412 - 153 1,290 2,300 9.6 -1.0 8.7 15.6 14,783 100.0