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Balance of Payments,
2 and Monetary Policy

A tla n t a , G e o r g ia
June

•

QQ

1963
■

Also in this issue:
D IS T R IC T

GOVERNM ENTAL

B O R R O W IN G
FAVORABLE

S IX T H

IN

A

C L IM A T E

D IS T R IC T

S T A T IS T IC S

D IS T R IC T

B U S IN E S S

C O N D IT IO N S

:5

L i
G o ld is a g la m d ftg is, as w e ll as a p r ecio u s m eta l. T h e w o rd co n ju res up
p ictu res o f In c a p riests, S p a n ish g a lleo n s, and E n g lish p irates; o f th e
“fo r ty -n in er s” ; an d o f m e d ie v a l alch em ists b en t o v er th eir stea m in g
retorts. It h a s b e c o m e o n e o f th e m o st e v o c a tiv e sy m b o ls o f ou r la n g u a ge.
M o st A m e r ic a n s u n d er fo rty h a v e n ev er se e n a g o ld c o in ; y et, w e
still sa y th at so m e th in g is “ as g o o d as g o ld .”
B u t if w e n o lo n g er h a n d le it d a ily , g o ld still e x c ite s o u r im a g i­
n a tio n s. W h a t it h as lo st in ro m a n ce, it h a s g a in ed in m ystery. W e d o
n o t se e it or h a n d le it; pirates n o lo n g er b ury it; yet, its m o v e m e n ts m ak e
h ea d lin e s all o v er th e w orld . W h en g o ld flo w s o u t o f th e U n ite d S tates
in g reat q u a n tities, as it h a s in recen t years, th e a v erage m a n fe e ls, rather
u n certa in ly , th at th e n a tio n ’s w e ll-b e in g is so m e h o w jeo p a rd ized . S o it
m a y b e , b u t h e m a y b e e x c u se d if th e c o n n e c tio n is n o t en tirely clea r to
h im . T h e rela tio n sh ip b etw e e n g o ld and th e n a tio n a l w elfa re is n o t a
sim p le o n e; w e m u st, th erefo re, b ew a re o f sim p le so lu tio n s to a c o m p le x
p ro b lem .
E sse n tia lly , g o ld p o se s a p ro b lem b e c a u se th e n a tio n s o f th e w o rld
h a v e m u tu a lly agreed th at it and it a lo n e sh a ll co n stitu te th e u ltim ate
m ea n s o f settlin g in tern a tio n a l d eb ts and b ec a u se e a ch n a tio n ’s sto c k o f
it is lim ited . F o r th e p a st sev e r a l years, the U n ited S tates h a s run a
d eficit in its in tern a tio n a l tra n sa ctio n s; that is, w e h a ve b o u g h t from
and le n t and g iv en to th e rest o f th e w orld m ore than th ey h a v e b o u g h t
fro m and len t and g iv en us. If this c o n tin u es, and if w e m u st settle any
su b sta n tia l part o f ou r y early d eficit in g o ld , w e sh a ll ev en tu a lly ex h a u st
o u r su p p lies. T h is, o f co u rse , is n o t the im m ed ia te p ro b lem . B e fo r e w e
ev er rea ch ed th at situ a tio n , o th er p ro b lem s w o u ld p resen t th e m selv es.
S o m e h a v e a lread y d o n e so . T o u n d ersta n d th ese cu rrent p ro b lem s,
h o w ev er, w e m u st u n d ersta n d h o w ou r d eficits arise. If w e u n d erstan d
th is, w e m a y b etter u n d erstan d so m e o f th e cu rren t p ro b lem s o f m o n e ­
tary p o licy .

The Ba la nce of P a y m e n ts Is the V illain
S

fc fe

w

jS

U

f

fe m

it m

r a

f a

g

f

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A ll th e p a y m en ts w e m a k e to or r eceiv e fro m the rest o f th e w o rld can
be d iv id ed , lik e G au l, in to th ree parts: ( 1 ) p u rch a ses and sa les o f g o o d s
and serv ices; ( 2 ) u n ila tera l transfers ( g if t s ) ; and ( 3 ) ca p ita l tran sac­
tio n s. T a b le I o n P a g e 2 sh o w s th e U . S. b a la n ce o f p a y m en ts fo r fou r
recen t years. It is im m ed ia tely o b v io u s th at ou r d ifficu lties d o n o t arise
from a d eficit in ou r civ ilia n , i.e ., p rivate and g o v ern m en t n o n -m ilita ry,
tra n sa ctio n s in g o o d s and serv ices. W e h a v e co n siste n tly so ld m u ch
m o re o f th ese to fo reig n ers th an w e h a v e b o u g h t fro m th em . T h e m in u s
sign s (in d ic a tin g n et U . S. p a y m en ts to fo re ig n er s) b eg in w ith ou r
m ilitary tra n sa ctio n s. O u r m ilitary ex p en d itu res o v e r sea s (e x p e n d itu res
o f tro o p s sta tio n ed ab road , co n stru ctio n at o v e rse a s m ilitary b a ses, e tc .)
h a v e c o n siste n tly b een m u ch h igh er than m ilitary receip ts (s u c h as
sa les o f e q u ip m en t and serv ices to fo reig n g o v e r n m e n ts). R e c e ip ts h ave
b een g row in g, h o w e v e r , in r esp o n se to d eterm in ed efforts b y th e U . S.
G o v ern m en t, and la st year ou r d eficit in this a c co u n t w a s so m ew h at
red u ced .

Table I: U. S. Balance of Payments, Selected Years
(Millions of dollars)
1956
I Goods and services
A. Civilian
Merchandise
Exports
Imports
Difference
Services
Exports
Imports
Difference
B. Military transactions
Exports
Imports
Difference
11 Unilateral transfers, net
pensions and remittances
Government grants, non­
military
Total
III Capital transactions, net
U. S. private capital
Long-term
Short-term
U. S. Government loans
Foreign capital
Balance on capital accounts
Errors and omissions
Deficit (— ) or Surplus ( + )

1958

1962

1961

17,379
12,804
+ 4,575

16,264
12,952
+ 3,312

19,915
14,514
+ 5,401

20,566
16,193
+ 4,373

6,055
3,875
+ 2,180

6,503
4,474
+ 2,029

7,745
5,462
+ 2,283

8,610
5,800
+ 2,810

161
2,949
— 2,788

300
3,435
— 3,135

406
2,947
— 2,541

638
3,006
— 2,368

—

—

—

—

665

— 1,733
— 2,398

722

— 1,616
— 2,338

878

— 1,851
— 2,729

—
—
—
+
—
—
—
Source: Survey of Current Business, U . S. Department of Commerce.
— 2,554
— 517
— 629
+
653
— 3,047
+
543
— 935

— 2 625
— 3 il
— 971
+
22
— 3,885
+
488
— 3 529

—
—
—
+
—
—
—

2,481
1,472
926
733
4,146
628
2,360

924

— 1,872
— 2,796
2,584
467
1,124
975
3,200
1,000
2,181

ury reco rd s and fro m rep o rts m a d e to th e F e d era l R e se r v e
B a n k s by b a n k s an d v a rio u s o th er b u sin e ss firm s th at h ave
d ea lin g s a b road . If o u r sta tistics w ere p erfec t, w e sh o u ld ,
by a d d in g u p th e p lu se s an d m in u se s in th e th ree parts o f
the b a la n ce o f p a y m en ts, c o m e o u t w ith th e sam e figure
w e o b ta in by ad d in g u p ou r in c r ea se in lia b ilities to fo r ­
eig n ers and o u r g o ld sa les. N e ith e r th e c o v er a g e n o r the
rep ortin g o f o u r fo r e ig n tra n sa c tio n s is p erfect, h o w ev er,
so th e tw o m u st b e r ec o n c ile d b y an en try en titled “errors
and o m is s io n s .” In n ea rly e v ery y ea r p rior to 1 9 6 0 , this
figure w as p o sitiv e ; th at is, th e r e co rd ed en tries in th e b a l­
a n ce o f p a y m en ts ten d ed to sh o w a larger d eficit th an w e
a ctu a lly h a d . T h e la st th ree y ea rs h a v e sh o w n ju st the
reverse, fo r th e rec o r d e d en tries h a v e understated ou r
d eficit.
T a b le II sh o w s h o w o u r p o stw a r b a la n c e o f p a y m en ts
d eficits an d su rp lu ses h a v e b ee n fin a n ced . A t tim es for-

Table II: Financing of U. S. Balance of Payments
Deficits or Surpluses
(Millions of dollars)

P e n sio n s and rem itta n ces c o n sist o f p a y m en ts to retired
e m p lo y e e s liv in g o v e rse a s, p a y m en ts by im m igran ts to
frien d s and relatives in “ th e o ld c o u n tr y ” , and p rivate
charitab le co n trib u tio n s, su ch as th o se m a d e by C A R E .
T h is item h as b een slo w ly and stea d ily g row in g. G rants
m a d e by the F ed era l G o v e rn m en t to fo reig n g o v ern m en ts
for n o n -m ilita ry p u rp o ses, h o w e v e r , h a v e rem a in ed re­
m ark ab ly stab le fo r th e la st tw e lv e years.
P riva te U . S. lo n g -ter m c a p ita l o u tflo w is n o w o n e o f
the larger elem en ts co n trib u tin g to ou r b a la n c e o f p a y ­
m en ts d eficit. It in clu d e s th e v a lu e o f p h y sica l assets
lo c a te d ab road, su ch as m a n u fa ctu rin g p la n ts, th at U . S.
resid en ts b u ild or acq u ire and ou r n et p u rch a ses o f fo reig n
secu rities, b oth b o n d s and sto c k s. S in ce this ca p ita l
o u tflo w h as b u lk ed so large sin c e 1 9 5 6 , so m e p e o p le h a v e
p ro p o sed th at w e lim it fo r e ig n er s’ a c c e ss to ou r secu rities
m ark ets, as v ariou s E u r o p e a n c o u n tries still d o . O th ers
in sist th at it w o u ld b e b etter to g et th e E u ro p e a n s to o p e n
their ca p ita l m ark ets, so th at m o re o f th e w o r ld ’s in v e st­
m en t m igh t b e fin an ced b y E u r o p e a n sa v in g s rather than
by A m erica n gold .
S h ort-term ca p ita l o u tflo w m a y ta k e sev era l fo rm s. T h e
m o st im p ortan t in rece n t yea rs h a s b e e n b an k lo a n s, n o ta ­
bly to Jap an . U . S. resid en ts m a y a lso in crea se their
b a la n ces in fo reig n b a n k s or m a y b u y any o n e o f sev era l
kin d s o f fo reig n sh ort-term secu ritie s. In any ca se, U . S.
sh ort-term ca p ita l h as b een o n e o f th e m o st v o la tile e le ­
m en ts in our b a la n ce o f p a y m en ts. In so m e years, w e h a v e
so ld m ore fo reig n assets th an w e h a v e b o u g h t, as in 1 9 5 3 .
In oth er years, th e o u tflo w o f U . S. sh o rt-term fu n d s h as
b een gigan tic, as in 1 9 6 0 and 1 9 6 1 .
F o reig n ers, o n th e o th er h a n d , m ay b u y U . S. secu rities
and in v est in p h y sica l assets lo c a te d h ere. T h is in flo w o f
fo reig n lo n g -term ca p ita l m a k e s ou r d eficit sm aller th an it
w o u ld o th erw ise b e. In T a b le I it th erefo re carries a p lu s
sign, alth ou gh it is n o t a lw ays so . In th e early p o stw a r
years, w h en foreign ers w ere liq u id a tin g p r e v io u sly a c ­
q uired assets, it h ad a m in u s sign.
O u r d eficit is m ea su red b y th e ch a n g e in o u r liq u id
sh ort-term lia b ilities to fo reig n ers p lu s o u r n e t sa les o f
gold . T h e se w e can d eterm in e q u ite a ccu ra tely fro m T r e a s­



Year

Balance of
paym ents
deficit ( —) or
■
surplus ( + )

1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961*
1962*

+ 1261
+ 4567
+ 1005
+ 175
— 3580
— 305
— 1046
— 2152
— 1550
— 1145
— 935
+ 520
—3529
—3743
— 3925
— 2360
—2181

U . S. short-term
liabilities to
foreigners
increase (— ) or
decrease ( + )

G old
sales (—)
purchases ( + )
+ 623
+ 2850
+ 1530
+ 164
— 1743
+
53
+ 379
— 1161
— 298
— 41
+ 306
+ 798
— 2275
— 731
— 1702
— 858
— 890

+ 638
+ 1717
— 525
+
11
— 1837
— 358
— 1425
— 991
— 1252
— 1104
— 1241
— 278
— 1254
— 3012
— 2223
— 1618
—1274

*In 1961 official holdings of foreign convertible currencies increased $116
million. In 1962 these holdings decreased $17 million. In other words, in
1961 the ir.crease in holdings of convertible currencies made our gold losses
and/or iincrease in claims of foreigners larger than the deficit would indicate; in 1962 it made them slightly smaller.
Source: Survey of Current Business, U. S. Department of Commerce.

eig n ers h a v e b e e n q u ite w illin g to b u ild up th eir sh ort-term
cla im s o n us. In th e first p la c e , U . S. b a n k s le n d in g to
fo reig n ers u su a lly req u ire th at a certa in m in im u m b a la n ce
be m a in ta in ed , ju st as w ith d o m e stic lo a n s. In th e seco n d
p la ce , fo reig n b a n k s an d firm s o fte n n e e d to m a in ta in d o l­
lar w o rk in g b a la n ces. T h e U n ite d S ta tes is p rin cip a l b an k er
to th e w o rld , an d p a y m e n ts are e ffe c te d fo r fo r e ig n e r s’
tra n sa ctio n s w ith th e U n ite d S ta tes, as w e ll as fo r tra n sa c­
tion s b etw een m a n y fo r eig n co u n tries, b y m e a n s o f tran s­
fers o n th e b o o k s o f U . S. b a n k s. In th e third p la c e , fo reig n
m o n eta ry a u th o rities m a in ta in d o lla r h o ld in g s as part o f
their in tern a tio n a l reserv es. O n e m ig h t th in k o f th e m as
a fo rm o f w o rk in g b a la n ce to a c c o m m o d a te eb b s and
flow s in their o w n b a la n ces o f p a y m en ts. T h e n e e d for
d o lla r b a la n c e s is n o t u n lim ited , h o w e v e r , an d ou r
recen t large d eficits h a v e ap p a ren tly m o re th an satisfied
the d em a n d for th em . F o reig n er s h a v e c o n v e r ted their sur­
plus cla im s in to g o ld and, in th e p r o c e ss, h a v e created
p ro b lem s fo r ou r m o n eta ry p o lic y -m a k e rs. T h e m ajor p ro b ­
lem is the co n flict th at h a s d e v e lo p e d b e tw e e n th e d o m estic
and ex tern a l resp o n sib ilitie s o f th e F e d e r a l R e se r v e S ystem .
O n e o f th e c h ie f d o m e stic r e sp o n sib ilitie s o f th e S ystem
is to c o n tro l th e q u a n tity o f b an k r e serv es in su ch a w ay
•

2

•

as to con trib u te to stab le e c o n o m ic grow th . T h a t is, w h en
th ere is dan ger o f in flation th ro u g h to o rap id an ex p a n sio n
o f sp en d in g, the F e d ord in arily a p p lies th e b rak es by h o ld ­
in g d o w n the in crea se in b an k reserves. W h en th e o p p o site
p ro b lem o f u n em p lo y m en t p resen ts itself, th e S ystem
g en erally p u m p s in m ore b an k reserves. T h e se o p era tio n s
are carried o u t p rin cip ally b y sellin g secu ritie s o n th e o p en
m ark et in th e o n e c a se or b u y in g th em in th e o th er. D u r­
in g th e th ree years 1 9 6 0 -6 2 , o n e o f th e m o st p ressin g
d o m estic p ro b lem s w as u n em p lo y m en t. A s a g en era l rule,
this ca lls fo r an ex p a n sio n a ry m o n eta ry p o licy . A n e x ­
trem ely ex p a n sio n a ry p o lic y , h o w ev er, m igh t h a v e w o rs­
e n ed ou r b a la n ce o f p aym en ts d eficit.

A D ile m m a for M o n e t a ry Policy
T h u s it is that d urin g th e la st th ree years, th e m o n eta ry
au th orities w ere co n fro n ted w ith tw o p ro b lem s w h o se
o r th o d o x so lu tio n s w ere m u tu a lly co n tra d icto ry . O n e p ro b ­
lem w as to fight r e cessio n and p ro m o te re co v ery in th e
d o m estic e c o n o m y . T h e oth er w as to red u ce or elim in a te
ou r b alan ce o f p a y m en ts d eficit and, thus, sto p th e o u t­
flow o f g o ld . T h e o r th o d o x p rescrip tio n fo r th e latter is
to tigh ten cred it and th ereb y raise in terest rates. H ig h er
in terest rates w o u ld ten d to d isco u ra g e th e o u tflo w o f
cap ital. If rates w ere raised h igh en o u g h and m a in ta in ed
lo n g en o u g h , th ey w o u ld d ep ress d o m estic e c o n o m ic a ctiv ­
ity and in c o m e s and, th ereb y, im p orts o f g o o d s an d ser­
v ice s. T h e p rescrip tion fo r th e fo rm er p ro b lem , h o w ev er,
is to ex p a n d b an k cred it and, th ereb y, lower in terest rates.
O b v io u sly , b oth o f th ese p rescrip tio n s c a n n o t b e ap­
p lied at o n e and th e sa m e tim e. T h e F e d e r a l R e se r v e
S y stem m et this d ilem m a w h en the rec e ssio n b eg a n in th e
sp ring o f 1 9 6 0 b y va stly in crea sin g th e availa b ility o f
cred it, but w ith o u t a llo w in g it to p r o c e ed so far as to drive
the U . S. T reasu ry b ill rate very far b e lo w th e le v e ls p re­
v a ilin g in o th er fin an cial cen ters. If it h a d fa lle n m u ch
b e lo w fo reig n sh ort-term in terest rates, so m e U . S. h o ld ers
o f liq u id fu n d s w o u ld h a v e h a d an in cen tiv e to tran sfer
m o n e y ab road, thus in crea sin g ou r d eficit. In o th er w o rd s,
th e d o m estic e c o n o m ic situ a tio n p rev en ted th e strict ap ­
p lic a tio n o f th e o rth o d o x p rescrip tio n fo r a b a la n c e o f p a y ­
m en ts deficit, and th e F ed e ra l R e se r v e co u ld d o n o m o re
th an carry o u t a h o ld in g a ctio n . T h e m ain attack o n the
b a la n ce o f p a y m en ts p ro b lem , th erefo re, h a d to c o m e
fro m d ifferent d irection s.
W h at, th en , h as b e e n d on e? In gen eral, th e U n ite d S tates
h a s tak en tw o typ es o f actio n s: th o se ca lcu la te d to ch a n g e
th e three b a sic co m p o n e n ts o f th e b a la n c e o f p a y m en ts
o v er the lo n g er run; and th o se d esig n e d to in flu en ce flow s
o f sh ort-term ca p ita l fro m d a y to d ay.
(1 )
T h e lon ger-ru n a ctio n s ca n b e su m m a rized briefly.
T o red u ce the size o f u n ila tera l tran sfers, fo reig n aid h as
b een m o re and m ore “tie d ” to th e p u rch a se o f U . S. g o o d s
and services. It is estim a te d th at m o re th an 8 0 p ercen t
o f n o n -m ilita ry aid is sp en t d irectly in th e U n ite d States.
T h e aid p rogram s, in ad d itio n , h a v e b e e n su b jected to
co n tin u a l scrutin y. T h e o b jec t o f this c o n tin u ed e x a m in a ­
tio n is to find so m e w a y o f red u cin g th e o u tflo w w ith o u t
w e a k en in g ou r m ilitary and p o litica l p o sitio n .
T h e A d m in istra tio n h as la u n c h e d an ex p o rt e x p a n sio n
d rive. T h e E x p o rt-Im p o rt B a n k and th e F o r e ig n C red it



In su ra n ce A sso c ia tio n h a v e p ro v id ed gu aran tees and in ­
su ran ce to ex p o rters and their b a n k s again st p o litic a l and
cred it risks (s e e th e Jan u ary 1 9 6 3 issu e o f this Review ).
T a x la w s h a v e b e e n rev ised to p erm it co rp o ra tio n s to d e ­
d u ct a p o rtio n o f their n ew in v estm e n t sp en d in g fro m their
ta x b ills. T o th e e x ten t th at this resu lts in m o re in v estm en t
and further r e p la ce m en t o f o u tm o d e d eq u ip m en t, co sts
h ere w ill fa ll and m a k e ou r ex p o rts m o re c o m p e titiv e. T h e
sam e th in g ca n b e said o f th e r e v isio n o f th e d ep recia tio n
g u id elin es, w h ich a llo w s b u sin e sse s to red u ce th eir tax
lia b ilities by w ritin g off their p la n t and eq u ip m e n t in v est­
m en t m o re rapidly.
(2 )
T h e a ctio n s ta k en to m o d ify sh o rt-term capital
flow s are m o re co m p lic a te d . T h e U . S. T rea su ry ’s E x ­
ch a n g e S tab iliza tio n F u n d w as th e first a g en cy in th e field.
It b eg a n b u y in g and sellin g fo reig n cu rren cies in th e spring
o f 1 9 6 1 , w h en th ere w a s a sev ere in tern a tio n a l financial
crisis. In 1 9 6 2 , th e F ed era l R e se r v e S y stem a cted to su p ­
p lem en t th e slen d er reso u rces o f th e S ta b iliza tio n F u n d .
In gen era l, th e o b jects o f th e tw o a g e n c ie s’ co m b in ed
o p era tio n s w ere: ( a ) to p rev en t v io le n t flu ctu a tion s in
fo reig n e x c h a n g e rates; ( b ) to red u ce th e in c e n tiv es for
transferring sh ort-term fu n d s ab road b y in flu en cin g the
c o st o f o b ta in in g c o v e r fo r e x ch a n g e risks; and ( c ) to
p ersu a d e fo reig n cen tra l b an k s to refrain fro m c o n vertin g
in to g o ld so m e part o f their a c cu m u la tio n s o f d ollars.
T h e first o f th ese o b jec tiv es h a s b e e n a ch ie v e d b y b u yin g
and sellin g “sp o t” fo reig n cu rren cies, i.e ., fo r im m ed ia te
d eliv ery . T h e se c o n d w as a c h iev ed b y sellin g fo reig n cu r­
ren cies “fo rw a rd ” , i.e ., fo r future d eliv ery . T h is h a s b een
d o n e o n ly by th e S ta b iliza tio n F u n d , n o t b y th e S y stem . It
ten d ed to d rive d o w n th e forw ard p rice o f th o se foreign
cu rren cies, w h ich h e lp e d us in this w a y . If fo reign , for
e x a m p le, S w iss, b a n k s acq u ire m o re d o lla rs th an th ey cu r­
rently n eed to sell to their cu sto m ers, th ey w ill n o rm a lly
sell th e e x c e ss to their cen tra l b a n k , w h ich , in turn, m ay
d em a n d g o ld fo r th em . T h e p rivate S w iss b a n k s m igh t,
h o w ev er, b e p ersu a d ed to b u y sh o rt-term d o lla r earning
assets, e .g ., U . S. T rea su ry b ills, if in terest rates w ere
h igh er h ere th an in S w itzerlan d , as th ey w ere in 1 9 6 1 .
T h e S w iss b a n k s w o u ld w a n t to b e assu red , h o w e v er, th at
th ey c o u ld c o n v ert th o se d o lla rs b a ck in to S w iss fran cs at
a later d a te w ith o u t lo sin g all their in terest gain s th rough
a ch a n g e in th e e x c h a n g e rate. T h is a ssu ra n ce c o u ld b e
o b ta in ed b y b u y in g S w iss fran cs fo r fu tu re d elivery; b u t
th e p rice o f fo rw a rd fran cs w a s so h ig h in early 1 9 6 1 th at
th e c o st o f co v e rin g th e e x c h a n g e risk c a n c e lle d o u t the
ex tra in terest th at c o u ld b e ea rn ed o n an A m e r ic a n in v est­
m en t.
C o n v ersely , in m o st o th er cen ters in 1 9 6 1 , sh ort­
term in terest rates w ere h ig h er th an in N e w Y o rk . T h is
ten d ed to attract fu n d s ab road , b u t if th e fo rw a rd p rices
o f th ese cu rren cies c o u ld b e d riven lo w e n o u g h , th e in ter­
est gain w o u ld b e o ffset b y th e c o st o f fo rw a rd co v er. T h e
T reasu ry, th erefo re, u n d er to o k to se ll S w iss fra n cs and
G erm a n m ark s forw ard , h o p in g to d rive d o w n forw ard
e x c h a n g e rates to th e p o in t th at sh ort-term fu n d s w o u ld
flow b a ck in to U . S. d o lla rs or, at lea st, sto p flow in g
o u t. T h e se ea rly o p era tio n s w ere su c c e ssfu l, and sim ilar
o p era tio n s h a v e b ee n carried o u t sin ce th en .
T h e third o b jec tiv e, p ersu a d in g fo reig n cen tra l b an k s to
fo reg o co n v e r sio n o f d o lla rs in to g o ld , w a s a c h iev ed in
•

3 •

tw o w a y s: ( 1 ) b y “sw a p ” a rran gem en ts and ( 2 ) b y d irect
b orrow in g o f fo reig n cu rren cies. T h e sw ap arran gem en t
p ro v id ed that, for e x a m p le, th e S w iss N a tio n a l B a n k w o u ld
g iv e th e F e d e r a l R e se r v e B a n k o f N e w Y o r k a certain
am o u n t o f S w iss fran cs in return fo r an eq u iv a le n t a m o u n t
o f d ollars. T h e N e w Y o r k B a n k c o u ld th en u se th e fran cs
to b u y d ollars eith er fro m S w iss co m m er c ia l b a n k s or fro m
the S w iss N a tio n a l B a n k itself. T h is so u n d s lik e a selfd efea tin g p ro p o sitio n , sin ce th e S w iss w o u ld find th e m ­
se lv e s w ith th e sam e a m o u n t o f d o lla rs as b efo r e th e tra n s­
action . N e v e r th e le ss, th ere is a real a d v a n ta g e to th e S w iss
N a tio n a l B a n k in th e sw ap . In effect, it trad es ord in ary
dollar cla im s, w h ich it eith er a lread y p o ss e sse s or w o u ld
h a v e to acquire fro m S w iss c o m m e rc ia l b a n k s, fo r d o lla r
cla im s th at carry an e x c h a n g e rate g u aran tee.
A ll th e sw ap agreem en ts m a d e w ith fo reig n co u n tries
p ro v id e that, w h en the sw a p is term in a ted , se ttlem en t w ill
be at th e e x ch a n g e rate at w h ich it w a s o rig in a lly m a d e.
T h e sa m e a d van tage to fo reig n m o n eta ry a u th orities a p ­
p lies to d irect b orrow in g s b y th e U . S. T rea su ry , sin ce w e
are b o rrow in g fo reig n cu rren cies and m u st rep ay the sam e
am ou n t, regard less o f w h at h a p p en s to th e e x c h a n g e rate.
T h e ad van tage to th e U n ite d S tates is th at w e d id n o t h a v e
to red eem so m e o f th e d o lla r cla im s o u tsta n d in g ag ain st us.
T h e F ed era l R e se r v e S y stem an d th e T rea su ry h a v e
thus d e v e lo p e d a certa in d iv isio n o f la b o r in th ese fo reig n
ex ch a n g e o p era tio n s. T h e S y stem h a s c o n cen tra ted o n sw ap
agreem en ts, w h ile th e S ta b iliza tio n F u n d h a s sp ec ia lize d
in u tilizin g fu n d s o b ta in e d b y d irect T reasu ry b o rro w in g
for sp o t and forw ard m a rk et o p era tio n s. T h e F e d e r a l R e ­
serve S ystem n o w h as sw ap a g reem en ts w ith ten fo reig n

co u n tries th at p ro v id e p o te n tia l reso u r c es e q u iv a len t to
ab ou t $ 1 ,5 5 0 m illio n in fo r e ig n cu rren cies.

W h e re D o W e G o fro m H e re ?
B a la n c e o f p a y m e n ts d eficits o ccu rrin g at th e sa m e tim e
as a d o m e stic r e c e ssio n and u n d er u tiliz a tio n o f resou rces
h a v e p o sed a d ifficu lt p ro b lem fo r U . S. p o lic y -m a k ers and,
p articu larly, fo r th e m a k ers o f m o n eta r y p o lic y . F o r m o st
o f th e p o stw a r p er io d , th ey c o u ld sa fe ly ig n o r e th e b a la n ce
o f p a y m en ts in fra m in g d o m e stic p o lic y . T h is h a s n o t b een
true n o w fo r th ree y ea rs and, u n til th e d eficits and th e
resu ltin g g o ld lo s se s are e lim in a te d , d o m e stic p o lic y d e c i­
sio n s m u st b e m a d e w ith o n e e y e o n o u r in tern a tio n a l p o s i­
tion . F o rtu n a te ly , th e re c e n t im p r o v e m e n t in e c o n o m ic
activ ity m a y h e lp to r ed u ce th e p o lic y c o n flict. If this im ­
p ro v em e n t is su sta in ed , d e m a n d fo r cred it is lik e ly to grow .
If it d o e s so , b a n k r e serv e p o sitio n s w ill b e c o m e tighter,
an d in terest rates w ill ten d to rise. T h e in c e n tiv e to m o v e
sh o rt-term fu n d s o u t o f this co u n try sh o u ld th en grad u ally
d isap p ear. R isin g in c o m e s w ill, it is tru e, ten d to in crea se
im p orts, b u t, at th e sa m e tim e, a h ea lth ier in v e stm e n t c li­
m ate at h o m e sh o u ld r ed u ce lo n g -te r m ca p ita l o u tflo w s.
E v e n if th is r e la tiv ely h a p p y turn o f ev e n ts m aterializes,
h o w ev er , n o t all o u r p ro b le m s w ill b e so lv e d , b y any
m ea n s. E v e n w ith p riv a te c a p ita l o u tflo w s g reatly d im in ­
ish ed , o u r e x p o r t su rp lu s still h a s a h e a v y b u rd en to bear.
In th e lo n g run, if w e are to c o n tin u e ou r m ilitary and
d ip lo m a tic c o m m itm e n ts ab road , w e m u st d e v e lo p a su f­
ficien t e x p o rt su rp lu s to fin a n ce th em .
L a

w

r e

n

F .e
c

M

a

n

s f i e

l d

District Governmental Borrowing in a
Favorable Climate
C ap ital m ark et d e v e lo p m e n ts in 1 9 6 2 w ere u n u su a lly fa ­
v orab le to state and lo c a l g o v ern m en t b orro w in g . G o v ­
ern m en tal u nits in th e S ix th D istrict sta tes, ta k en as an ag ­
gregate, w ere e sp e c ia lly en th u sia stic in th eir r e sp o n se.
T o ta l d eb t issu es m a rk eted a m o u n ted to $ 1 .6 b illio n , up
21 p ercen t from 1 9 6 1 . T h is p erfo rm a n ce m a rk ed th e sixth
co n secu tiv e year in w h ich su ch d eb t issu es e x c e e d e d $ 1 b il­
lion , as w e ll as th e six th a ll-tim e h igh in a n n u al d ollar
v o lu m e. In co n tra st w ith this sharp in crea se fo r D istrict
states, total d eb t issu e s for th e fifty sta tes in crea sed o n ly
3 p ercen t d uring 1 9 6 2 .
T h e d ifferen ce b etw e en th e rela tiv e p erfo rm a n ces o f th e
D istrict states and the n a tio n is in e v en sharp er co n tra st
w h en sh ort-term issu es, p rim arily tem p o ra ry h o u sin g n o te s,
are elim in a ted . D istric t lo n g -term b o n d issu e s o f all b o r­
row in g u n its w ere u p 2 2 p ercen t, v ersu s slig h tly m o re than
2 p ercen t for the fifty states. In fa ct, a lm o st all th e n a tio n a l
in crea se in lo n g -term m ark etin gs fo r 1 9 6 2 c o u ld b e attrib­
u ted to th e $ 2 0 0 m illio n n e t in crea se o f th e D istr ic t states.

d iv er g e n c e s w h e n th e y e a r -to -y e a r p er fo r m a n ces o f in d i­
v id u a l sta tes are co m p a r e d . F o r e x a m p le , tw o D istrict
sta tes, L o u isia n a an d G e o rg ia , in c r e a sed th eir to ta l secu ri­
ties issu e s o v er $ 1 0 0 m illio n ea c h . B o th th e se sta tes, p lu s
T e n n e sse e , sh o w e d in c r ea se s o f m o r e th a n 3 5 p ercen t, w h ile
A la b a m a ’s in c r e a se w a s o n ly slig h tly m o r e th an 6 p ercen t.
A t th e o th er ex tr em e , F lo r id a c u t h er to ta l v o lu m e ab ou t
$ 4 0 m illio n , or 12 p ercen t, and v o lu m e in M ississip p i w a s
d o w n 6 p ercen t. B o th th e latter sta tes, h o w e v e r , to o k ad ­
v a n ta g e o f m o r e fa v o ra b le ca p ita l m a rk et c o n d itio n s to
refu n d so m e h ig h c o u p o n se cu rities b y rep la cin g th em
w ith lo w er c o u p o n issu es. T o ta l D istr ic t refu n d in g issu es,
stim u la ted b y d e c lin in g in terest co sts fo r ta x e x e m p t secu r­
ities, in cr e a se d $ 3 8 m illio n to a v o lu m e m o re th an six
tim es th a t o f 1 9 6 1 . T h e a c c o m p a n y in g ta b le p ro v id es
a d d itio n a l co m p a r iso n s b e tw e e n th e v o lu m e o f lo n g - and
sh o rt-term issu e s in 1 9 6 2 .

T h e v o lu m e o f to ta l d eb t secu rities issu e d b y b o rro w in g
un its in D istrict states d u rin g 1 9 6 2 , h o w e v e r , sh o w s sharp

T h e m ajor fa c to r c o n trib u tin g to im p r o v e d b o rro w in g c o n ­
d itio n s la st y ea r w a s a sh arp in cr e a se in co m m e r c ia l b a n k s’




Im p r o v e d B o r r o w in g C on d itio n s

•

4 •

d em an d for m u n icip als. O n e o f the strik in g fea tu res o f this
in creased d em a n d , m o reo v er, w as that it o ccu rred d u rin g a
reco very p h a se o f th e cy c le . F o r ex a m p le , in 1 9 5 8 in ­
crea sed bank h o ld in g s a cco u n te d for 4 7 p ercen t o f th e n et
in crease in state and lo c a l g o v ern m en t d eb t. In 1 9 5 9 this
p ro p ortion w as cu t to o n ly 9 p ercen t. B e tw e e n 1 9 6 0 and

New State and Local Government Security Issues
in 1962
(Millions of dollars)
Short-Term*

Long Term
Refunding

Percent
Change
1962 1962 from
Total
1961
A la b a m a
F lo r id a
G e o r g ia
L o u is ia n a
M is s is s ip p i
1 9 .7
T e n n e s s e e
D i s t r i c t S t a t e 4s 6 8 . 9
U n it e d
S ta te s
4 7

1962
Total

Other

Percent
Change
1962 from

1961

Percent
Change

1962 1962 from
Total
1961

7 5 .5
+
1 6 .5 1 5
+
1 6 5 1 0 4 .8
3 7 .1
+ 2 0 6 6 4 8
2 1 .6
+
2
+1 7 69 3 . 5
5 .1
2 1 0 .3
* *
— 4 64 .13
2 7 4 .3
—
7
0 .2 * *
7 8 .3
+ 2
0 .9 * *
1 1 0 .28
1 5 0 .2
+
18
4 4 .3
+
7
1 0 5 8 5. 5
5 +5 . 4 5
2 7 7 .0 +
1 6 9
8 5

—
7
4 0 .6
—
+
16
+
1 5 0
—
6
+
4 6
7+
18
6+ 8 . 0
1

*Mostly public housing issues.
**D ata on refunding, if any, not available.
Source: Computed from basic data supplied by the Investment Bankers Asso­
ciation of America and The Bond Buyer.

1 9 6 1 , th e ratio rose from 16 p ercen t to 5 4 p ercen t, fo l­
lo w in g the ty p ica l pattern. It, th erefo re, w o u ld h a v e b een
rea so n a b le to e x p e c t th at th e ratio w o u ld d e c lin e w ith the
c o n tin u ed e x p a n sio n o f b u sin ess a ctivity in 1 9 6 2 . In stead ,
the p ro p o rtio n ro se to 85 p ercen t la st year.
M o st o f th e co n d itio n s u n d erly in g this ch a n g e in c o m ­
m ercia l b a n k s’ in v estm en t p o lic ie s are w ell k n o w n . A
p o licy o f m o n eta ry ea se, co n tin u in g lo n g er than du rin g
p a st reco v eries, resu lted in an e x p a n d e d reserve b a se. A t
the sam e tim e, b a n k s co n tin u e d to e x p e r ie n c e h ig h -lev el
flow s o f savin gs and tim e d ep o sits. A n ad d itio n a l fa cto r w as
the grow th in v o lu m e o f n eg o tia b le C ertificates o f D e p o sit
in trod u ced in 1 9 6 1 . H o w e v e r , th e real k ick er c a m e at the
en d o f 1 9 6 1 , w h en ceilin g s o n in terest rates th at m em b er
b an k s w ere p erm itted to p a y o n su ch d ep o sits w ere raised.
In creased p u b lic savin gs an d so m e su b stan tial sh iftin g o u t
o f oth er form s o f fin an cial in v estm en t by co n su m ers
b ro u gh t a year o f record g row th fo r co m m e r cia l b a n k s in
rela tively h ig h -c o st d ep o sits.
T h e se rap id ly grow in g, co st-b ea r in g lia b ilities o f b an k s
had to b e p u t to w o rk w ith o u t d ela y . It w as n o t surprising
that b an k s turned first to a m ark et secto r that offered
v o lu m e, c o n v e n ie n c e , and fa v o ra b le after-tax y ield . N o r
w as it surprising th at larger b a n k s led th e field , in v iew
o f th e d eg ree o f cen tra liza tio n o f b o th prim ary and
seco n d a ry m ark ets for m u n icip a ls in th e m ajor b a n k in g
cen ters. T h e n a tio n ’s 1 0 0 largest c o m m ercia l b an k s in ­
crea sed their h o ld in g s o f m u n icip a ls du rin g the la st h a lf
o f 1961 and the first h a lf o f 1 9 6 2 at a rate a lm o st d o u b le
that o f all co m m ercia l ban k s. In co n tra st, b a n k s in the
S ixth D istrict h a d sh o w n c o m p a ra tiv ely little in crea se in
the seco n d h a lf o f 1961 bu t step p ed u p their a cq u isitio n s
o v er $ 1 8 5 m illio n , or at an a n n u al rate o f a lm o st 2 5 p er­
cen t, d urin g th e first h a lf o f 1 9 6 2 . F o r th e fu ll year, th ey
a d d ed m ore th an $ 3 0 0 m illio n in sta te and lo c a l o b lig a ­
tion s to their h o ld in g s, an in crea se o f 2 0 p ercen t.



Means a n d Costs of Im p o rtin g Capital
S tate and lo c a l g o v ern m en ts o f th is area tra d itio n a lly c o m ­
p e te fo r b o rro w ed fu n d s in th e n a tio n a l m ark et. O n e
m ea su re o f th e e x te n t to w h ich ca p ita l fu n d s are im p orted
is su g g ested b y th e m ea n s o f u n d erw ritin g th e se debt
secu rities. F o r th e p a st th ree years an a verage o f o n ly 13
p ercen t o f th e to ta l d o lla r v o lu m e o f d eb t issu e s o f th e
D istrict sta tes w as u n d erw ritten e x c lu siv e ly b y “so u th ern ”
firm s. C o m b in e d u n d erw ritin gs b y “so u th e r n ” an d “p re­
d o m in a n tly so u th e r n ” sy n d ica tes a c co u n te d fo r le ss than
19 p ercen t o f to ta l v o lu m e d u rin g th e sa m e p erio d .
T h e p attern o f ca p ita l flo w s a lread y rev ie w e d w a s a c­
co m p a n ied b y tw o a d d itio n a l fa cto rs fa v o r a b le to b o rro w ­
ers o f this reg io n d u rin g 1 9 6 2 . F irst, th e ca p ita l ex p ortin g
m a ch in ery o f th e m ajor m a rk et cen ters w a s a lread y ori­
en ted to h a n d le e x p a n sio n in th e m u n icip a l m arket,
2 2
w h erev er it ap p eared . S eco n d , th e c o m p e titio n fro m oth er
areas fo r this typ e o f b o rro w in g d id n o t ex p a n d . In fact,
th ere w ere siza b le red u ctio n s in req u irem en ts b y 21 states,
and so m e six sta tes, w h ich h a v e b e e n la rg e b o rro w ers in
recen t years, re d u ced th eir a g gregate req u irem en ts for
lo n g -term fu n d s $1 b illio n .
In a d d itio n to greater o v era ll av a ila b ility o f fu n d s, w h ich
co n trib u ted to flex ib ility in th e p la c e m e n t, v o lu m e, and
m atu rity m a n a g em en t o f state and lo c a l d eb t, th ere w ere
sign ifican t c o st sa v in g s fo r D istr ic t g o v ern m en ts during
1 9 6 2 . F o r e x a m p le, a w eig h te d a v era g e o f a 4 0 -p e r c e n t
sa m p le o f this area’s n ew offerin gs d u rin g 1 9 6 1 sh o w ed a
n et in terest c o st o f 3 .5 8 p ercen t. A sa m p le o f co m p arab le
size fo r 1 9 6 2 sh o w s th at n et in terest c o st w a s red u ced
so m e 3 2 b a sis p o in ts to 3 .2 6 p ercen t.
A n u m b er o f in tern a l fa cto rs rela tin g to d eb t issu es o f
this reg io n a id ed th e m a rk et p r o c esse s in red u cin g interest
co sts. T h e avera g e size o f issu es in crea sed fro m $ 1 .2 m il­
lio n in 1 9 6 0 to $ 1 .6 m illio n in 1 9 6 1 . A fu rth er in crea se to
$ 1 .8 m illio n o ccu rred in 1 9 6 2 . A s th e avera g e size o f
issu es in crea ses, o f co u rse, m o re b id d ers are attracted,
and, u n d er c o n d itio n s sim ilar to th o se o f th e p a st year,
b id d in g is lik e ly to b e m o re a g g ressiv e. A ls o , th ere h as
b e e n a g ro w in g tren d to w a rd in crea sed o fferin gs b y state
an d larger c ity g o v ern m en ts, w h ich ty p ic a lly are rated
h igh er, and a red u ctio n in sc h o o l b o a rd an d sp e c ia l au ­
thority issu es.

Recent District Trends
P relim in ary d ata fo r th e first quarter o f 1 9 6 3 in d icate a
v o lu m e o f a lm o st o n e -h a lf b illio n d o lla rs fo r g o v ern m en tal
b o d ie s in D istr ic t sta tes. T h is is a record fo r any quarter
and su g g ests an e x te n sio n o f th e b a sic tren d s rev iew ed
a b o v e. S ev era l d ev e lo p m e n ts ap p ear to augur w e ll fo r a
co n tin u a tio n o f rela tiv ely fa v o ra b le ca p ita l im p o rt co n d i­
tio n s fo r this reg io n . B u d g eta ry refo rm is receiv in g in ­
crea sed atten tio n at m a n y le v els. A lso , m o re and m ore
ad m in istrators are r eco g n iz in g th at m o d ern m a n a g em en t
m e th o d s are esse n tia l to m eetin g th e gro w th p ro b lem s o f
state and lo c a l g o v ern m en t b o d ie s. H o w e v e r , m u ch re­
m a in s to b e a c c o m p lish e d in th e e lim in a tio n o f o v er-la p p in g serv ice ju risd ictio n s and d u p lica tio n o f fa cilities. C o n ­
tin u in g n a tio n a l d isc u ssio n o f th e ta x e x e m p tio n p rivilege
an d o f th e u se o f In d u strial A id fu n d in g u n d ersco res the
im p o rta n ce o f p ro tectin g fa v o ra b le a ccess to n ation al
•

5 •

p o o ls o f cap ital. S u ch a c c ess, d esira b le at all tim es, is e sp e ­
cia lly cru cia l if c o n d itio n s sh o u ld b e c o m e le ss fa v o ra b le
for ca p ita l-im p o rtin g reg io n s th an th ey h a v e b een du rin g
th e p a st tw o years. D e v e lo p m e n ts o f th e p ast few w e ek s
in th e m o n e y and ca p ita l m a rk ets su g g est th at su ch a
ch a n g e m a y alread y b e u n d er w ay.
H

i r

a

m

J .

o
H

n

e

a

Bank Announcements
On May 2, the First National Bank of South Brevard
Beaches, Satellite Beach, Florida, a newly organized
member bank, opened for business and began to remit
at par for checks drawn on it when received from the
Federal Reserve Bank. Officers are C. R. Brown, Presi­
dent; William H. Gleason and Elwood J. Mellon, Vice
Presidents; and Walter Noe, Assistant Vice President
and Cashier. Capital is $400,000, and surplus and other
capital funds, $350,000, as reported by the Comptroller
of Currency at the time the charter was granted.
The Citizens National Bank of Shawmut, Shawmut,
Alabama, a newly organized member bank, opened for
business on M ay 6 and began to remit at par. Officers
are W. J. Polidoro, President; and Warren F. Dent,
Executive Vice President and Cashier. Capital is
$150,000, and surplus and other capital funds, $150,000,
as reported by the Comptroller of Currency at the
time the charter was granted.
On May 10, The Lighthouse Point Bank, Pompano
Beach, Florida, a newly organized nonmember bank,
opened for business and began to remit at par. Officers
include Robert L. Kester, Chairman of the Board; W.
Earle Laing, President; William A . Solien, Executive
Vice President; C. R. Mays, Jr., Vice President; and
L. B. Hurlburt, Jr., Cashier. Capital is $600,000, and
surplus and undivided profits, $240,000.
The Citizens Bank, Georgiana, Alabama, a nonm em ­
ber bank, began to remit at par on May 13. Officers
are A . C. Smith, President; Julian F. McGowin, Vice
President; and W. M . Wise, Executive Vice President
and Cashier.
On M ay 15, The Bank of Belleview, Belleview, Flor­
ida, a newly organized nonmember bank, opened for
business and began to remit at par. Officers include
Vincent M. Razzano, Chairman of the Board; H. H.
Harris, President; Franklin F. Ehlers, Vice President;
and Gerald E. Hussey, Cashier. Capital is $155,000,
and surplus and undivided profits, $77,500.
The First National Bank of St. Andrews, Panama
City, Florida, a newly organized member bank, opened
for business on M ay 22 and began to remit at par.
Officers are John Christo, Jr., Chairman of the Board
and President; John L. Lavretta, Jr., Executive Vice
President; and F. E. LeGallee, Cashier. Capital is
$250,000, and surplus and other capital funds,
$150,000, as reported by the Comptroller of Currency
at the time the charter was granted.
On May 28, The M idtown Bank of Miami, Miami,
Florida, a newly organized nonmember bonk, opened
for business and began to remit at par. Officers include
F. deC. Oak, Chairman of the Board; Tully F. Dunlap,
President; Verner L. Lowe and John T. Bills, Vice
Presidents; and David Class, Cashier. Capital is
$300,000, and surplus and undivided profits, $285,000.



Debits to Individual Demand Deposit Accounts
Insured Commercial Banks in the Sixth District
(In Thousands of Dollars)
Percent Change
Year-to-date
4 Months
April 1963 from
1963
April
March
April
from
1962
1963
1962
1962

April
1963

March
1963

2,675,199
48,528
974,935
43,713
40,498
105,971
329,182
207,279
27,777
69,501

2,585,821
43,886
953,071
41,459
37,924
93,136
309,852
214,624
28,690
63,033

2,325,758r
43,466
861,658
37,454
34,901
80,289
291,353
178,086
25,118
60,642

+3
+ 11
+ 2
+5
+7
+ 14
+6
—3
—3
+ 10

+ 15
+12
+ 13
+ 17
+ 16
+32
+13
+ 16
+ 11
+ 15

+10
+7
+7
+8
+ 11
+24
+ 10
+ 15
+8
+ 11

7,014,902
26,786
51,324
133,095
85,638
70,875
27,080
248,556

6,474,686
23,265
46,643
119,003
73,716
65,973
25,167
238,787

6,028,279r
n.a.
n.a.
n.a.
n.a.
61,905
n.a.
236,658

+8
+ 15
+ 10
+ 12
+ 16
+7
+ 8
+4

+16
n.a.
n.a.
n.a.
n.a.
+ 14
n.a.
+5

+9
n.a.
n.a.
n.a.
n.a.
+9
n.a.
+ 1

63,194
57,249
922,792
20,441
97,325
1,137,733
1,721,064
46,013
334,072
96,355
16,414
246,153
93,002
81,531
513,710
189,683
52,402

55,420
51,517
874,762
18,959
94,820
1,075,768
1,565,363
44,523
286,935
99,268
16,362
232,756
82,518
70,197
483,588
178,593
46,813

n.a.
48,575
852,688
19,459
82,347
1,006,764
1,490,546
n.a.
272,579
85,722
n.a.
239,022
90,733
71,728
456,798
183,278
n.a.

+ 14
+ 11
+5
+8
+3
+6
+10
+3
+ 16
—3
+0
+6
+ 13
+ 16
+6
+ 6
+ 12

n.a.
+18
+8
+5
+ 18
+ 13
+15
n.a.
+23
+ 12
n.a.
+3
+3
+ 14
+ 12
+3
n.a.

n.a.
+ 12
+0
—1
+9
+5
+5
n.a.
+ 11
+8
n.a.
—4
n.a.
+8
+6
+2
n.a.

5,271,464
63,471
47,521
3,001,398
137,149
35,128
128,038
67.826
9,179
52,173
23,326
17,436
154,767
43,996
20,106
53,545
194,003
35,003

4,848,257
58,190
42.911
2,728,961
136,310
33,939
118,766
57,631
10,080
53,280
21^84
16,264
146,299
42 019
20'853
49,675
185,012
35,328

4,431,691r
56,866
45,689
2,476,813
119,747
33,849
119,589
55,390
10,559
51,323
20,575
16,796
130,184
34,683
19,982
48,571
172,315
37,036

+9
+9
+ 11
+ 10
+ 1
+ 4
+8
+ 18
—9
—2
+10
+7
+6
+ 5
—4
+8
+5
—1

+ 19
+ 12
+4
+ 21
+ 15
+4
+7
+22
— 13
+2
+ 13
+4
+ 19
+27
+ 1
+10
+ 13
—5

+ 13
+5
+0
+20
+ 11
+8
+2
n.a.
+5
+ 7
+8
—6
+10
+17
—3
+3
+6
+0

2,973,188
7,821
81,961
346,182
4,439
26,736
77,381
87,216
25,598
1,599,909
6,636
16,533

2,769,436
7,752
81,621
296,872
4,470
23,900
74,718
87,371
26,398
1,496,981
6,308
17,662

2,525,417r
n.a.
76.300
272,409
n.a.
n.a.
64,718
85,476
n.a.
1,407,887
n.a.
n.a.

+7
+ 1
+0
+17
—1
+7
+4
+ 0
—3
+ 7
+5
—6

+ 18
n.a.
+ 7
+27
n.a.
n.a.
+20
+2
n.a.
+14
n.a.
n.a.

+8
n.a.
+6
+ 10
n.a.
n.a.
+9
+2
n.a.
+5
n.a.
n.a.

886,301
66,605
38,396
357,674
29,470
50,444
25,679

882,235
66,817
38,320
362,000
27,480
46,506
26,354

831,214r
60,342
37,798
342,803
28,591
47,722
23,629

+0
—0
+0
—1
+7
+8
—3

+7
+ 10
+2
+ 4
+3
+6
+9

+6
+12
—2
+3
+ 1
+ 13
+9

37,190
25,245
18,579

37,855
24,189
16,576

n.a.
23,242
n.a.

—2
+4
+ 12

n.a.
+9
n.a.

n.a.
+8
n.a.

2,466,281
58,664
385,675
48,669
92,154
275,138
876,298

2,368,676
50,974
376,969
50,175
108,576
259,065
822,528

2,229,628r
52,184
331,217
43,514
96,180
250,840
808,466

+4
+ 15
+2
—3
— 15
+ 6
+7

+11
+12
+ 16
+12
—4
+ 10
+8

+6
+4
+8
+ 11
+0
+6
+7

SIXTH DISTRICT, Total 21,287,335
Total, 32 Cities
12,715,369

19,929,111
11,938,432

18,371,987r
11,145,291

+7
+7

+ 16
+14

+ 12
+8

+0

+9

+10

ALABAMA, Totalf
Anniston . . . .
Birmingham . .
Dothan . . . .
Gadsden . . . .
Huntsville* . .
Mcbile . .
.
Montgomery . .
Selma* . . . .
Tuscaloosa* . .

.
.
.
.
.
.

FLORIDA, Totalf . .
Bartow* . . . .
Bradenton* . . .
Brevard County*
Clearwater* . . .
Daytona Beach*
Delray Beach* . .
Ft. Lauderdale*
Ft. IViyeisNorth Ft. Myers*
Gainesville* . . .
Jacksonville . . .
Key West*
. .
Lakeland* . . .
Greater Miami*
Ocala* . .
. .
Orlando . . . .
Pensacola
. . .
St. Augustine* . .
St. Petersburg . .
Sarasota*
. . .
Tallahassee*
. .
Tampa....................
W. Palm-Palm Bch *
Winter Haven* . .
GEORGIA, Totalf .
Albany
. . . .
Athens* . . . .
Atlanta . . . .
Augusta . . . .
Brunswick . .
Columbus . . . .
Dalton* . . . .
Elberton . . . .
Gainesville* . .
Griffin* . . . .
LaGrange* . .
Macon
. . . .
Marietta* . .
IM
ewnan . . . .
Rome*
. . . .
Savannah . . . .
Valdosta . . . .

.

.

.
.
.

LOUISIANA, Totalf**
Abbeville* . . .
Alexandria* . . .
Baton Rouge
. .
Bunkie* . . . .
Hammond* . . .
Lafayette* . . .
Lake Charles
. .
New Iberia* . . .
New Orleans . . .
Plaquemine*
. .
Thibodaux* . . .
MISSISSIPPI, Totalf**
Biloxi-Gulfport* .
Hattiesburg . . .
Jackson . . . .
Laurel* . . . .
Meridian . . . .
Natchez* . . . .
PascagonlaMoss Point* . .
Vicksburg
. . .
Yazoo City* . . .
TENNESSEE, Totalf**
Bristol* . . . .
Chattanooga . . .
Johnson City* . .
Kingsport* . . .
Knoxville . . . .
Nashville . . . .

UNITEn STATES
344 Cities . . . 308,000,000 306,700,000r 281,500,000

*Not included in total for 32 cities that are part of the national debit series main­
tained by the Board of Governors.
fP artly estimated.
n.a. Not available.
**Includes only banks in the Sixth District portion of the state.
r Revised.

•6•

S ix th

D is tr ic t

S ta tis tic s

Seasonally Adjusted
(All data are indexes, 1957-59 = 100, unless indicated otherwise.)

Latest Month
(1963)

One
Month
Ago

Two
Months
Ago

One
Year
Ago

Latest Month
(1963)

One
Month
Ago

Two
Months
Ago

One
Year
Ago

Mar.
Mar.
Apr.

7,367
109
112

7,363r
114
137

7,444r
122
110

6,968r
107
103

Apr.
Apr.
Apr.
Apr.
Apr.
Apr.
Apr.
Apr.

112
108
114
113
68
2.9
40 0
129

112
107
114
109
75
3.0
40.2
128

111
107
113
108
66
3.5
39.9
127

108
104
110
106
83
3.4
39.9
120

Apr.
Apr.
Apr.

151
135
152

150
134
149

149
132
145

136
126
134

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Mar.
Farm Cash R e c e ip t s ...................................Mar.
Department Store S a l e s * / * * ....................Apr.

5,835
113
109

5,916r
115
115

5,950r
130
103

5.586r
134
97

PRODUCTION AND EMPLOYMENT
Nonfarm Employment...................................Apr.
M anufacturing........................................Ap;\
Nonmanufacturing...................................Apr.
Construction........................................Apr.
Farm Employment........................................ Apr.
InsuredUnemployment,(PercentofCov.Emp.) Apr.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr.
Manufacturing P a y r o lls ..............................Apr.

102
99
103
94
77
4.3
42.3
124

102
100
103r
92
85
4.6
42.6
125r

102
100
103
89
87
4.9
42.7
123

100
94
101
83
83
4.7
41.6
110

142
119
127

140
119
121

144
120
112

132
112
113

Mar.
Mar.
Apr.

2,983
123
98

3,000r
141
109

3,029r
149
99

2,795r
115
99

Apr.
Apr.
Apr.
Apr.
Farm Employment........................................ Apr.
Insured Unemployment, (Percentof Cov. Emp.) Apr.
Apr.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Manufacturing P a y r o lls .............................. Apr.

115
117
114
121
79
4.3
41.0
137

115
117
114
119
84
4.6
40.2r
135

114
117
113
113
87
5.3
40.5
134

111
111
110
104
78
4.6
40.2
124

Apr.
Apr.
Apr.

168
143
137

165
141
147

161
140
140

150
129
134

Mar.
Mar.
, Apr.

6,352
112
100

6,307r
117
123

6,372r
119
104

6,089r
104
95

. Apr.
Apr.
. Apr.
Apr.
Apr.
Insured Unemployment, (Percentof Cov. Err.p.)1 Apr.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr.
Manufacturing P a y r o lls .............................. Apr.

110
111
110
123
94
4.5
41 2
128

110
111
109
124
97
5.0
40.6r
127

110
111
109
- 123
95
5.7
40.0
125

108
110
107
118
94
4.9
40.6
123

150
131
136

152
134
137

150
131
131

134
122
129

SIXTH DISTRICT

GEORGIA

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Mar. 39.16138 960r 39,337r 37,298r
Farm Cash R e c e ip t s ...................................Mar.
327
114
123
120
C r o p s .......................................................Mar.
153
112
130
135
L ivestock..................................................Mar.
110
115
115
110
Department Store S a l e s * / * * .................... May121p
118r
135r
118
Department Store S t o c k s * .........................Apr.
122
123
126
112
Instalment Credit at Banks,* (Mil. $)
New Loans
............................................. Apr.
169
166
178
150r
Repayments.............................................Apr.
149
149
146
135r

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate)
Farm Cash R e c e ip t s .........................
Department Store Sales** . . . .
PRODUCTION AND EMPLOYMENT

PRODUCTION AND EMPLOYMENT
Nonfarm Employment...................................Apr.
Manufacturing........................................ Apr.
Apparel..................................................Apr.
Chemicals.............................................Apr.
Fabricated M e t a ls ..............................Apr.
Food....................................................... Apr.
Lbr., Wood Prod., Furn. & Fix. . . . Apr.
P a p e r ..................................................Apr.
Primary M e t a ls ................................... Apr.
Textiles..................................................Apr.
Transportation Equipment.................... Apr.
Nonmanufacturing...................................Apr.
Construction........................................ Apr.
Farm Employment........................................ Apr.
Insured Unemployment, (Percent of Cov. Emp.) Apr.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr.
Manufacturing P a y r o lls .............................. Apr.
Construction C ontracts*.............................. Mar.
Residential
............................................. Mar.
All O th e r ..................................................Mar.
Electric Power Produ ction**.................... Mar.
..............................Apr.
Cotton Consumption**
Petrol. Prod, in Coastal La. and Miss.**
. Apr.
FINANCE AND BANKING
Member Bank Loans*
All B a n k s..................................................Apr.
Leading C i t i e s ........................................May
Member Bank Deposits*
All B a n k s..................................................Apr.
Leading C i t i e s ........................................May
Bank D e b it s * /* * ........................................Apr.

I ll
109
131
105
112
103
93
105
99
95
1V5
I ll
101
84
3.7
40 8
131
141
129
150
131
98
156

110
109
129
104
110
103
93
107
98
94
116
111
100
89
4.0
40-7
330
124
122
125
145
%
157

110
109
129
104
110
102
93
107
96
95
114
110
98
90
44
40 3
128
140
108
167
145
95
157r

108
107
125
100
107
103
93
104
99
97
103
109
95
88
42
40 6
124
137
114
756
124
105
143

149
142

149
141

147
141

1^4
128

130
123
140

131
124
137

129
125
132

121
117
127

FINANCE AND BANKING

LOUISIANA

FINANCE AND BANKING
Member Bank L oans*...................................Apr.
Member Bank D eposits*..............................Apr.
Bank D e b it s * /* * ........................................Apr.

MISSISSIPPI

ALABAMA
INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate)
Farm Cash R e c e ip t s .........................
Department Store Sales** . . . .

Avg. Weekly Hrs. in Mfg., (Hrs.)

Mar.
Mar.
Apr.

5,350
119
97

5.367r
129
120

5,422r
134
104

5,106r
110
98

Aor.
Apr.
Apr.
Apr.
Farm Employment........................................ Apr.
Insured Unemployment, (Percentof Cov. Emp.) Apr.
Apr.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Manufacturing P a y r o lls .............................. Apr.

107
102
109
93
90
4.0
40 4
122

107
102
109
92
81
4.2
40 1
120

106
102
108
91
92
4.9
40.1
118

105
101
107
97
88
4.6
40 2
116

150
128
132

150
129
135

146
128
128

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate)
Farm Cash R e c e ip t s .........................
Department Store Sales*/** . . .

133
119
120

PRODUCTION AND EMPLOYMENT
Nonfarm Employment.........................

PRODUCTION AND EMPLOYMENT
Nonfarm Employment.........................

FINANCE AND BANKING

FINANCE AND BANKING
Apr.
Apr.
Apr.

TENNESSEE

FLORIDA
INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Mar.
Farm Cash R e c e ip t s ................................... Mar.
Department Store S a l e s * * ......................... Apr.

11,274
154
147

ll,007r
103
157

ll,120r
112
149

10,754r
137
137

PRODUCTION AND EMPLOYMENT
Nonfarm Employment...................................Apr.
Manufacturing........................................ Apr.
Nonmanufacturing...................................Apr.
Construction........................................Apr.
Farm Employment........................................ Apr.
Insured Unemployment, (Percentof Cov. Emp.) Apr.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . . Apr.
Manufacturing P a y r o lls ..............................Apr.

116
119
I 15
94
I ll
3.4
40.7
155

116
119r
115
92r
117
3.5
41.5
157

115
118
114
90
116
3.9
40.9
152

115
120
114
90
115
3.3
41.4
153

FINANCE AND BANKING
Member Bank L o a n s ...................................Apr.
Member Bank D e p o s i t s ..............................A;r.
Bank D e b its * * .............................................Apr.

147
132
144

148
134
136

145
130
134

130
123
129

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate)
Farm Cash R e c e ip t s .........................
Department Store Sales*/** . . .
PRODUCTION AND EMPLOYMENT

FINANCE AND BANKING
. Apr.
. Apr.
. Apr.

*For Sixth District area only. Other totals for entire six states.
**Daily average basis.
p Preliminary.
r Revised.
Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U.S. Dept, of Labor and ccoperating state agencies; cotton
consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U.S. Bureau of Mines; elec. power prod., Fed. Pcwer Comm ; farm cash receipts and
farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes cal:ulated by this Bank.




7

DISTRICT BUSINESS CO N D ITIO N S
| I I I I I f I I I I I | I I I I I
B illio n s of D o lla rs
— A nnual R ate
Seas. Adj.

1957-59*100

Personal Inco/ne

T h e recently heightened tempo of the District's economy persists. Further
modest gains occurred in both em ploym ent and most principal lines of
production. The pace of activity in the farm econom y, how ever, w as
som ewhat restrained, as drought gripped a w ide a re a . Consumers,
responding to a rise in their personal incomes, continued to spur the
economy: Retail spending rem ained strong, and consumer borrowings
w ere hefty.

Nonfarm

Seas. Adj.

Mfg. Employment

Average Weekly

^

W orked in M fg

Total nonfarm em ploym ent in the District rose slightly in April.
B o th n o n m a n u fa ctu rin g and m a n u fa ctu rin g e m p lo y m e n t in c r ea sed . E m p lo y ­
m e n t in th e ap p arel, p rim ary m e ta ls, an d fa b rica ted m e ta ls in d u stries sh o w e d
th e h e a lth ie st a d v a n ces a m o n g th e v a rio u s ty p es o f m a n u fa ctu rin g . T h e rising
tren d in co n str u c tio n e m p lo y m e n t, w h ich b e g a n ea rly th is y ear, w a s ex te n d e d
in A p ril. T h e u n e m p lo y m e n t rate d e c lin e d fu rth er, rea ch in g its lo w e s t p o in t
sin ce M a y 1 9 5 7 . S te e l p ro d u ctio n m a in ta in e d th e stro n g u p w a rd trend b eg u n
la st F eb ru ary; co tto n co n su m p tio n also ro se.

Construction
Contracts

Electric Power

The farm economy suffered a setback from dry w eather during M ay,
although recent showers have brought some relief. C ro p s an d p astu res
in th e so u th ern p o rtio n s o f L o u isia n a , M ississip p i, an d A la b a m a w ere stu n ted
by la c k o f rain; se e d g erm in a tio n w a s p o o r; an d c ro p g ro w th w a s sp o tty .
M ea n w h ile , farm m a rk etin g s, h e a v ily w e ig h te d b y liv e sto c k at this tim e o f
year, w ere d o w n slig h tly in M a rch an d A p r il fro m th e y e a r-a g o le v e l; d e clin es
in citru s, b e e f, and b roiler m a rk etin g s m o re th a n o ffse t in cr e a se d sh ip m en ts o f
eggs and p ork . N e v e r th e le s s, th e in d e x o f p rices rec eiv ed b y th e r e g io n ’s farm ers
rose in resp o n se to a sharp A p r il in c r ea se in citru s p rices. E m p lo y m e n t on
farm s m o v e d d o w n in A p ril fro m m o n th -ea rlier and y ea r-ea rlier le v e ls.
u*

Retail spending continued strong. C h e c k b o o k sp en d in g b y in d iv id u a ls,
g o v ern m en ts, and b u sin e sse s r e a ch ed a n e w reco rd h ig h d u rin g A p ril, reflectin g
ga in s in a ll sta tes e x c e p t T e n n e sse e . W h ile sa les at h o u se h o ld a p p lia n ce stores
ro se m o d era tely , sa les at fu rn itu re stores d e c lin e d slig h tly . A m in or d eclin e
o ccu rred in sa les at D istrict d ep a rtm en t sto res d u rin g ea rly M a y . F in a l figures
fo r A p ril in d ica te th e d ip in th at m o n th w a s fa irly w id e sp re a d , sin ce m o st
cities e x p er ie n c e d a r ed u ctio n in sa le s v o lu m e . M o r e c o m p r e h e n siv e d ata fo r
retail sa les at firm s o p era tin g o n e -to -te n o u tle ts, a v a ila b le after a greater tim e
lag, in d ic a te a m o d era te im p r o v e m e n t in sa les th ro u g h M a rch . P e r so n a l in ­
c o m e , ad ju sted to e lim in a te th e e ffects o f th e sp e cia l v e te ra n s’ in su ra n ce refund
an d in crea sed c o n trib u tio n s to s o c ia l secu rity in su ra n ce d u rin g th e Jan u aryF eb ru a ry p erio d , ro se m o d e ra te ly and r ea ch ed a n e w reco rd in M arch . C o n ­
su m ers c o n tin u e d to ex p a n d th eir u se o f cred it, th u s su p p le m e n tin g th eir in co m e
gains.

P E R C E N T O F R E Q U IR E D

Total bank credit at District member banks declined som ew hat dur­
ing April. S ecu rity h o ld in g s w ere r ed u ced m o d e r a te ly ; lo a n s h e ld u n ch a n g ed ;

RESERVES

an d d e p o sits d ec re a sed . H o w e v e r , to ta l b a n k cred it at w e e k ly rep ortin g b an k s
in cr ea se d slig h tly in M a y : L o a n s r o se so m ew h a t, m o re th an o ffsettin g a d eclin e
in in v e stm e n ts, an d d e p o sits reco rd ed a slim gain.

Excess Reserves

1

—
Borrowings from

1961

S +

K

'-4 .3
_

4 »TH ' f> lT V »<rT y t*W 5 1
‘
1962
1963


http://fraser.stlouisfed.org/
•Seas. adj. figure; not an index.
Federal Reserve Bank of St. Louis

N o t e : D a ta on w h ich statem en ts are based have been adjusted to elim in ate sea so n a l influences.