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Show Iwrneune stubs for ; mm BUDGETS WASHINGTON, Jan. 23. Establish- j ment by the nations of the world of j honestly balanced budgets !s the first i step toward stabilization of foreign ex-i changes and the restoration, of normal , financial conditions. Paul M. Warburg ' of New York, former member of the! Federal Reserve Board, today told the Second Pan-American conference. "A country's ability, without addi-j tional borrowing, to balance its regu-l lav budget, is the test of its solvency," , Mr, Warburg said "The character of; this test at this juncture will decide the measure of Its future credit; and upon that. In turn, will largely depend its power to rehabilitate its commerce and trade and Its foreign exchanges." A number of countries will never again regain their previous exchange levels, Mr. Warburg predicted. The ability of those countries to produce and to save, he added, would determine deter-mine the extent to which they could reclaim the shrinkage of their currency curren-cy standards. "But whatever the level may be to recover," he continued, "ultimately it will be to their vital interest once more to fasten it to a definite gold relation re-lation and to re-establish a stable exchange, ex-change, fluctuating between the maxima max-ima and minima of gold partities, without which a country's trade and growth "-ill remain subject to a fatal handicap. J-Tho mere perfect the machinery of credit, however, the more insignificant becomes the necessity of settling in actual gold. "We are living in an era where the production of money and credit has increased nnd the production of goods has decreased. In order to emerge wgmusl produce lc35 credit and money more goods." Consumption taxes, that is taxes levied on sp.epding and not on saving, were advocated by Mr. Warburg, who declared that "extravagance must not only br curbed on top, but just as much on the part of the masses receiving re-ceiving the bulk of the national income in-come and, in the aggregate, doing the largest share of the country's spending." spend-ing." "Our present form of taxation has proved a failure," Mr. Warburg said, "insofar as in a rising market the equivalent of , extreme income and profit taxes is being added to the price the-public pays for things, and insofar as it cripples the investment power of a country and thereby retards its further development" It is the duty of the United States, he said, either through private initiative, initia-tive, or, if need be, through direct government gov-ernment action, to relieve those countries coun-tries where "reconstruction is beyond the graGp of a people or where it Is facing starvation or economic, annihilation.' annihi-lation.' He predicted that the three Americas would "be drawn together In a commercial and financial union of growing strength and intimacy," ap a result of the fact that "capital in the old world will find so va3t a field of work cf 1 econslructlon and eo'oniza-tion eo'oniza-tion in 'darkest Europe' that it wiil noi be able to devote itself as liberally to 'the development of the countries of ! th ir. hemisphere as it did in Ihe past." 1 Mr. "Warburg summarized his views jas follow;: j "The- debacle of foreign exchanges lis the logical consequence of the finan ;cial anarchy prevailing slnco 'king 'gold' was deposed, j "The discount of the' foreign ex-j ex-j changes of borrowing countries is not the disease, but the symptom. It represses re-presses the tdiCferentlal between various vari-ous degrees of depreciation of money' I and credit, and between dissimilar grades of productivity, in different i countries. ' "TTken the equalising power of gold,' interfet rsttus, and government credit ;has spent ItseVf. the discount of for-' ; eign exchanges acts as the only remaining re-maining means of adjustment. I "'Foreign exchanges or the countries affected cannot be stabilized until : their importations and exportations more nearly balance one another and i .until the process of dilution of cur-j rency and government credit Is uni-l formly reduced, cr arrested. i "Rigidly balanced budgets are, there- j fore, required, because they restore! , the public credit; because they arrest! i further inflation; because they lead to! 'curtailment of expenditures and in-' in-' creased taxation, which, if properly de-i ' vised, makes for decreased consumption, consump-tion, increased production" and lower prices. And these in turn are essen- rial in that they stimulate exportations! 1and discourage, unessential Importations, Importa-tions, and thereby bring about the pos-J isibility of more nearly balancing the! ; two. j ! "For years to come the rehabilitation rehabilita-tion of currency standards and foreign exchange levels of borrowing coun-i tries will depend primarily upon the i fiscal policy of their governments; it will be the character of their budget (Including, as it does, the question of labor and increased production) that, more than any things else, will decide their future economic worth and development. devel-opment. "If we agreed on these premises It Is obvious why It would be foolish to think that In times like the present foreign exchanges could or should hnve been permanently 'pegged.' " oo |