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This paper, a theoretically oriented presentation, examines the social optimality of the current policy of one-hundred per cent guarantees for public agencies' debt issues. The analysis suggests and explores an alternative policy: Coordinating debt repayment with the performance of the assets underlying the debt. The limits of this alternative are analyzed under conditions of uncertainty, characterized by imperfect and expensive information. The first section of the paper will introduce the problem of socially optimal agency debt policy. The classical solution for the optimal agency behavior and its modifications, necessitated by costly imperfect information, will be the focus of the following two sections. The analysis in the next two sections will examine optimal agency policy in a state-preference world utilizing a Pareto criteria for social welfare. The final section of the paper will study the implications for agency optimality in a log utility/channel capacity information world. [ABSTRACT FROM AUTHOR]

A conference paper is presented that examines several issues that are related to postwar bank lending policies in the U.S. The author investigates whether or not bank lending policies are the cause of price increases in markets such as real estate and consumer goods, if these policies lead to the deterioration in the quality of the debt structure and how to prevent these policies from leading to inflationary expansion of demand deposits.

Donald B. Woodward in his paper on public debt and institutions seems about equally awestruck by three sets of thoughts. That the Treasury has various specific and contingent obligations that are not a part of the formal public debt. But most individuals and business enterprises have similar unclassified liabilities. Woodward mentions such items as social security commitments, and commitments to make future loans. Now one can go to any lengths he finds useful in this direction. His second thought is that the influence of the debt upon governmental policies will have baneful effects upon all principal social institutions, and his third, that the Treasury has become a maker—he thinks the principal maker—of monetary policy. His paper does not appear to be a call to action of any kind. For the most part it is rather a recitation of various direct and devious ways in which the family, the church, the economic organization, and the state will be inescapably corroded or distorted by the demands of a great public debt.

Charles C. Abbott's paper on the commercial banks and the public debt has tentatively proposed certain courses of action without insisting that they offer a final answer. This opens up topics for comment without being controversial. Abbott has directed his attention to the broader aspects of public debt management rather than solely to commercial bank government security portfolio management. He has properly stated that debt management for banks cannot be treated independently of other nonbank security holdings. He indicates the importance of debt management and has cited a number of questions which need to be carefully considered in formulating policy. He urges that the interest charges should be held down and that the debt should be managed in such a way as to prevent it from becoming a factor of instability in the economy. He rails attention to the fact that a public debt may serve some beneficial public advantages. For instance, it may become a medium for the accumulation of savings.

The article discusses a paper "Management of the Public Debt After the War," by Simeon E. Leland, that was published in the June 2, 1944 issue of the journal "American Economic Review." Professor Leland's paper does not state specifically what should be done or when action should be taken. The first proposition for emphasis is that the men size of the debt is not crucial in determining its effects on the economy. Changes in its composition and in the holders of it may be of greater importance than changes in the quantity of debt outstanding. The possible shifts of securities between individuals, insurance companies, banks and the Reserve System are perhaps of more significance as well as of greater magnitude than any likely short-term changes in the size of the postwar debt. It is important to note that there can no longer be a passive debt policy in which inaction may be presumed to yield neutral effects. The very decisions not to initiate conversions or not to induce shifts in the type of debt holders are themselves forms of action. With the debt a large factor in a dynamic economy, it cannot at any time be ignored.

The article compares the implications of United States Savings Bonds and alternative investment media on individual and family investors. The author examines several types of bonds and their relative advantages and disadvantages to investors. He notes that the interest on savings bonds is subject to the federal income tax but is exempt from state or municipal taxes on income. He also recommends savings bonds as a reliable investments and feels they should be marketed as such, instead of the reliance solely on patriotism.

The aim of this paper is to examine the arguments for and the implications of the maintenance of the wartime pattern of yields on government securities. The pattern is roughly defined by three-eighth of 1 percent on 90-day Treasury bills, seven-eighth of 1 percent on one-year Treasury certificates of indebtedness, and two and a half percent on the longest term bonds. This is substantially the pattern which was adopted fortuitously early in the war to aid in financing the war by means of bank borrowing at low cost. The arguments adduced for this policy are inconsistent and are not convincing. The extension of this policy during peacetimes, particularly when full employment exists, implies the complete surrender by the Reserve System of quantitative control over the supply of money and eventually necessitates the curtailment of the present-day lending functions of commercial banks. Such a policy affords no satisfactory alternative quantitative basis of monetary control, which control is made to depend entirely upon the management of Treasury receipts and expenditures.

The principal emphasis here is, first, upon the national income and what its probable future level, in dollar terms, implies for those unhappy people whose task it will be to manage a debt of almost uncomprehended size in a period when taxation will not be popular, however sure it may be. Second, the paper refers briefly to the distribution of national income and some of its consequences for the handling of the debt. With respect to debt management itself, it defers to the fiscal and monetary experts. The facts of the federal public debt in relation to national income are in themselves fairly simple. The total debt of the federal government in October 1946 was 26334 billion dollars, all but 1 billion of which was interest bearing. This includes all those bonds, notes, certificates of indebtedness, and special issues commonly classified as "public debt" by the Treasury Department, but not guaranteed securities. It embraces all indebtedness in that category which the Congress has, by statute, limited to a total of 275 billions.

The historians have a familiar saying that history must be written anew each generation to comply with the changing theories of historical development. If there was a history of the federal debt in the United States no doubt it, too, would be rewritten from time to time to prove or disprove different theories concerning the economic effects of that debt. Unfortunately, however, there is nothing approaching a general history of the debt in this country, so the future scholar who writes such a history will not have the satisfaction of correcting the errors of his predecessors nor will he have their mistakes to warn him. In a brief paper of this kind it is not possible to give a comprehensive treatise on the federal debt. The discussion, therefore, will be limited to a survey of the general course of the debt and to some comments on its larger aspects. Under the funding plan of 1790, the struggling young nation assumed a debt of approximately 17 million dollars. Despite substantial repayments, by 1803 current deficits and the Louisiana Purchase raised the gross debt to a peak of 86.4 millions.

The article presents several articles contributed by readers to "American Economic Review." The research paper "A Note on Cyclical Wage Rigidity," by Joseph Shister, attempts to interpret the downward rigidity of wage rate patterns in different manufacturing industries in the U.S. during the cyclical turning point in business which began in 1929. The point emphasized in that aside from the influence of unionism on rigidity, there are factors relating to the economic structures of the industries in question which determine the relative degree of wage rigidity. The article D. McC. Wrights Character Attack" by H.G. Moulton, the author comments on the sweeping indictment in the "The New Philosophy of Public Debt," by David McC. Wright, an economics professor, published in September 1943, issue of "American Economic Review," that Moulton has deliberately misrepresented A.H. Hansen's, an economics professor, stand. Wright cites five bits of evidence as proof of author's intellectual dishonesty.

The article presents critical discussion of a few papers related to city planning and municipal finance. Cities are customarily defined as incorporated places having a population of 2,500 or more. The diversity that exists among such places is very wide, and it is surprising indeed that there are so many common attributes in such a heterogeneous collection of communities. The displacement of local units by regional government may solve the financial problems of parent cities, but it is pertinent to inquire if the solvency of a particular city or cities should be the prime motivation in meeting the demand that something be done to stem the tide of decentralization. It is questionable that equitable distribution of the debt burden of parent cities on what have been called the parasitic dormitory cities would abate the tendency toward decentralization. A major point is that fiscal management or administration is all important, that given two cities with equal economic resources, one may successfully weather a financial storm and the other may not, depending upon the caliber of the fiscal administrators and the freedom of action allowed them by state legislation.

The article discusses the system of public finance as established under Alexander Hamilton, former head of the U.S. Department of Treasury. It discusses the qualification of Hamilton and the huge work that was put forward. It discusses how he went about formulating a plan for a financial system based on experience of earlier financial systems, mainly the English financial system. Features of Hamilton's system of finance which are similar to those of the English system are his scheme for funding domestic debts, his plan for a sinking fund and the charter of the first Bank of the United States.

In this article a complete macroeconomic model has been specified in order to investigate effects of investment incentives in a general equilibrium setting. Constant returns to scale are assumed for the production sector implying the lack of an investment demand function. Investment is determined through firms' decisions to produce investment goods and households' saving and portfolio decisions. The saving decision results from an inter-temporal utility maximization. The effectiveness of tax policy in stimulating private investment is found to depend critically on the form of the complete fiscal package. At one extreme investment incentives have no immediate impact and actually have a lagged effect causing investment to decline. This occurs if the resulting increase in saving is entirely "invested" in government debt. Consumption increases due to higher wealth and investment suffers. At the other extreme investment incentives initially increase private investment dollar for dollar. This occurs if the government revenue foregone via investment incentives is matched by a concurrent reduction, in government purchases of investment goods from the production sector. The conclusion of this article is that judging the effectiveness of tax policy requires much more attention to the development of an appropriate macroeconomic context.

Presents a series of abstracts on various topics of economics published in the January 1964 issue of the periodical 'The Southern Economic Journal,' vol. 30. Suggested areas to which economists should give attention; Appraisal of the alleged substitute for money in the monetary system of the U.S.; Suggested ways for the management of federal debt of the U.S.

The article focuses on the contributing factors of the sharp increase in the cost of state and local government borrowing. The purpose of this research is to focus on the factors specifically related to tax exemption and to discover whether or not they explain the very high increase in state and local government borrowing cost. Article topics include accounting factors for the post World War II increase in tax-exempt yields, dividing the subsidy of tax exemption between borrowers and investors, and maturity-yield differentials.

The article presents a case study of debt incurred by Florida cities during the 1920s. During that period tax delinquencies and unbalanced budgets were common, yet by the 1950s these issues were substantially under control. The author surveys the causes and magnitude of problems that plagued Florida municipal finance and describes corrective actions taken. The relationship to national fiscal policy is also discussed. In the author's view, federal countercyclical policies cannot be pursued with disregard to fiscal decision-making at the local level.

The article focuses on the impact of public debts on credit control in the U.S. Many people think debt hinders economic expansion, while others believe it can make monetary and credit policy more effective. The author attempts to answer these questions and concludes that large public debt limits the Federal Reserve's option yet it extends its influence and makes the overall economy more responsive to its actions. To ensure the positives outweigh the negatives, he advises that the Treasury be able to meet its requirements within a proper budget policy.

The article presents empirical research to support ongoing questions regarding the extent of distribution of public debts on various socioeconomic classes within the United States. Assumptions are outlined describing the primary theory that the distribution effects mirror those of other liquid assets. Results, however, are presented suggesting that lower-income groups shoulder a larger portion of the debt. Tax data from the U.S. Dept. of the Treasury is utilized to demonstrate these results. Additional commentary is given discussing the validity of previous fiscal policies within post-World War II conditions.

The article presents a reprint from the "Commercial and Financial Chronicle." The article discusses the U.S. national debt and its impact on the economy, particularly the work of the federal government, and its impact on production, employment, income, credit volume, bank deposits, and other areas of American industry. The author presents two proposals, legislation creating non-marketable securities for bank ownership or payment of outstanding bank-held obligations with Federal Reserve credits.

This article presents information about postwar changes in commercial bank investments in U.S. government securities. The author notes that there has been a significant decrease in the amount of government securities held by commercial banks since this figure peaked in February, 1946. The author investigates the reasons behind this decrease and discusses the management of bank portfolios. Some of the contributing factors responsible for the decrease include the retirement by the U.S. Treasury of government securities held by the commercial banking system and the sale of government securities to finance loans to private borrowers and to meet increases in reserve requirements.

The article discusses the issues related to the management of public debt in the United States. The federal debt during the war period increased by 219 billion dollars, reaching a peak of 280 billion dollars in February 1946. The increased debt was a consequence of heavy borrowing requirements during the period. Using this scenario, the author discusses several problems associated with public debt and debt management. These problems included debt reduction, the term structure of debt, ownership distribution, the interest rate structure, credit control in relation to debt management and the administrative problems arising from the present division of responsibility among different government authorities.