Since it is hardly likely anyone will contend that the bank depositors should bear the cost of the gold purchased by the Treasury, we must of necessity charge this cost to the United States Government. Hence the cost of the gold which has been purchased must be included in the Federal debt. Likewise, the Federal Reserve notes in circulation, being in the final analysis a direct liability of the Treasury, must also be added to the Federal debt.

The so-called gold certificates held by the Federal Reserve banks. approximately equal the gold purchased, plus the Federal Reserve notes in circulation.

Observe on chart B, figure 1, the course of the gross public debt, Federal, State, and local, plus the gold certificate liabilities. This debt stood at $7,000,000,000 in 1916, it rose sharply to $32,000,000,000 in the World War period. From thence it climbed slowly to $34,000,000,000 in 1930, then began its rapid ascent as the result of the heavy deficit financing, reaching $51,000,000,000 in 1934. From this point it continued to climb still more rapidly because of the Treasury's gold purchase policy. It reached $73,500,000,000 by the end of the fiscal year 1939; $80,500,000,000 by the end of the fiscal year 1940; and stands at roundly $85,000,000,000 at the present time. With appropriations and authorizations already made by the Congress, and assuming that the regular operating costs of the Government will be about what they have been in the last year or two, I believe it is safe to predict that the total public debt of the United States will reach $100,000,000,000 by the end of the fiscal year, 1942.

Leaving out State and local debts, figure 2, we find the Federal public debt took a somewhat different course. Starting with $1,200,000,000 in 1916 it rose to $25,000,000,000 during the war period; from whence it dropped to $16,000,000,000 in 1930. From this point it began to climb rapidly to reach the figure of $32,000,000,000 in 1934; $54,000,000,000 in 1939; $61,000,000,000 in 1940 and stands at present at about $65,000,000,000, and will probably reach $80,000,000,000 by

1942.

Now contrast the course of the debt of the United Kingdom, figure 3, with that of the United States, during this same period. The debt of the United Kingdom is shown on the graph, minus her war debt, to us, which she carries at approximately $3,600,000,000. The subtraction of her war debt to us, however, does not alter the comparison. Note that the course of the United Kingdom debt remained at practically the same level from the postwar period until shortly before the beginning of her present war. From the high point in 1920 it had dropped about 21⁄2 billions in 1930. During the next 9 years it rose $3,000,000,000.

A mere glance at these lines shows the difference between the manner in which the British exchequer managed its finances and that of the United States Treasury.

With respect to Federal financing, leaving out State and local debts, we did a better job of financing than the British up to 1930. Their debt dropped 8.6 percent during that period while ours dropped 36 percent. But during the next 9 years the British debt rose only 11 percent while that of the United States rose 237 percent.

1 The average rate of exchange used in converting pounds into dollars is $4. This should have been more nearly $4.30, which would make a slight change in the dollar debt figures shown on the line representing the course of the United Kingdom debt, but would not alter the trend of the debt and hence the comparison of the manner in financing between the United States and the United Kingdom.

Even leaving out gold certificate liabilities, our Federal debt rose 150 percent from 1930 to 1939.

It is a serious question whether the United States Treasury may not at this moment be in a more distressed condition than that of the United Kingdom.

What kind of defense can be built on our present weakened Treasury and disordered currency?

How much longer can our Treasury withstand the heavy drain upon it that is taking place, to meet our own defense needs and to give aid to Britain?

In my opinion this should be the most important question before the Congress today. This may not be apparent now, but I am sure we shall learn, and I believe at no distant time in the future, that this is the truth.

The CHAIRMAN. The committee appreciates what you have said, Mr. Smith.

Mr. SMITH. I would like to put these charts and this statement in the record.

Mr. JOHNSON. Mr. Chairman, with reference to the charts, that would delay the printing, and it would delay the hearings.

The CHAIRMAN. We will find out from the Public Printer, and if it would not delay the printing and publication of the record we would be very glad to put the charts in. The clerk just tells me they cannot put a colored chart in any way.

Mr. SMITH. It would not need to be colored.

Mr. JOHNSON. If we can without delay I would not have objection. Mr. SMITH. May I just make this request: As soon as you find out perhaps I will have to rewrite this.

The CHAIRMAN. Why do you not take that up right now to find out whether it can go in. If you put the statement in in that way the statement would appear ridiculous. If we cannot get it in the report you will have to rewrite it.

Mr. SMITH. Will it be all right to submit this to him instead of what he has taken down?

Mr. JOHNSON. Except this: I think you had better call Mr. Smith's attention to the fact that there has been a great demand from all members of this committee and also Members of the House to expedite the publishing of these hearings, so you had better prepare your statement right away.

The CHAIRMAN. Thank you very much, Mr. Smith.

Mrs. Rogers, do I understand Mr. Dewey submitted a statement to you?

Mrs. ROGERS. I put it in. You have that.

The CHAIRMAN. Very well. The committee will now go into executive session.

(Whereupon the committee went into executive session.)