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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 jS fc fe w fe m it m U f a r a g f f t it a 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 c e F. M a n s f ie ld 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 Tennessee D is t r ic t S ta te s U n it e d S ta te s 7 5 .5 3 7 .1 1 7 9 .5 4 6 .3 1 9 .7 1 1 0 .8 4 6 8 .9 4 7 5 5 .4 + + + — — + + + 15 20 63 41 7 22 18 5 1962 1961 Total 1 6 .5 2 1 .6 5 .1 0 .2 0 .9 4 4 .3 2 7 7 .0 Other Percent Change 1962 from + 165 + 6648 * * ** ** + + 577 169 Percent Change 1962 1962 from Total 1961 1 0 4 .8 2 4 0 .6 2 1 0 .3 2 7 4 .3 7 8 .3 1 5 0 .2 1 0 5 8 .5 8 5 6 8 .0 — 7 — 22 + 16 + 150 — 6 + 46 + 18 + 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, 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. H o 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* . . IMewnan . . . . 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 2 116 150 128 132 150 129 135 146 128 128 133 119 120 PRODUCTION AND EMPLOYMENT Nonfarm Employment......................... INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Farm Cash R e c e ip t s ......................... Department Store Sales*/** . . . 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 »<r‘T 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.
@FedFRASER