Gold to the Rescue

Like a man trying to fill a glass of water to the brim without spilling a drop, Treasury Secretary George Humphrey last week turned in a neat performance with the national debt. The Treasury's recent offering of $2 billion in seven-year 2 3/4% bonds went so well that Humphrey permitted it to be oversold by $240 million. With the market for Government borrowings beginning to tighten up for the first time in many weeks, Humphrey did not know when he would be able to sell bonds at such a low rate again.

But when the bonds were issued last week, they brought the federal debt just $25 million under the $275 billion limit, so close that the debt could easily spill over. So Humphrey dug into the Treasury's "free gold"--the profit realized in 1934 when President Roosevelt devalued the dollar (by increasing the price of gold from $20.67 to $35 an ounce). Using $500 million of the $1 billion left in the hoard, Humphrey bought U.S. securities from the Federal Reserve System and cut the debt by $500 million.

But Humphrey's balancing act is far from over. From here on, he can keep under the limit only by cutting into the

Government's cash balance. For flexibility in paying the Government's bills, Humphrey likes a cash balance of $6 billion, spread out in banks across the country. But with spending higher than receipts between now and year's end, the cash balance (which includes the free gold) will dwindle to around $2 billion, the minimum the Treasury needs to operate. One of the first jobs of the new Congress will be to raise the debt limit.

This file is automatically generated by a robot program, so reader's discretion is required.