Brighter Treasury

The U.S. Treasury and the nation's security dealers last month showed what careful preparation and attention to public demand can do in the business of financing the Government. Starting Dec. 1 to raise $9 billions, it succeeded in raising well over $11 billions before Christmas--the biggest single bond campaign in any country's history.

More significant than the huge figures was the fact that in the New York City area, where over half of the bonds were sold, sales to noncommercial banking sources (individuals, corporations, insurance companies, savings banks) ran to about 68% of the total. As a general rule such sales can be counted as less inflationary than sales to commercial banks which create new deposit money.

Nevertheless, part of the Treasury's success in getting the bonds out into the hands of the public was illusory and had little to do with curbing inflation. Many an insurance company, for instance, bought Governments under public pressure by dumping other securities (municipal bonds fell during the month) and may later sell their Governments to the commercial banks. A big proportion of purchases made by corporations represented only a conversion into bonds of idle cash which was having no inflationary effect since it was not being used.

Proof that the issue had relatively little effect on the real cause of inflation--namely individual spending--was that retail sales all during December were the highest on record. The Treasury has climbed several steps up the ladder leading to sound fiscal policy; but it is still not out of purgatory.

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