Washington, January 8, 1934.

Devaluation of the dollar within the next three months has become imperative as a consequence of the President's announcement that $6,000,000,000 of new capital must be borrowed by the government before next June.

The only explanation for delay which was given in the annual message was that "certain of our sister nations find themselves so handicapped by internal and other conditions that they feel unable at this time to enter into stabilization discussions based on permanent and world-wide objectives."

Asked to explain the above, administration officials say that the foreign governments have not balanced their budgets. This cannot of course refer to Great Britain, which will have a small surplus this year, but it does refer to France, where there is an indicated deficit of about a half billion dollars.

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Just why the United States with its unbalanced budget should blame other nations for their unbalanced budgets is not explained officially. But the belief is growing that the real reason for delay in stabilization has not been given out and that it refers entirely to the legal snags that have been encountered in handling the gold profit.

One thing is clear--even if the President wanted to stabilize tomorrow he could not do so because Congress will have to authorize the confiscation of the gold profit. When authority to acquire the gold profit is obtained, stabilization will be hastened.

The problem with respect to gold profit is this: When American citizens went to their banks and patriotically deposited their gold and their gold certificates last March, the banks promptly turned over the metal itself to the Federal Reserve Banks, which in turn deposited it in the Treasury of the United States and received a receipt. If that gold has increased in value, and it has gone up already by nearly fifty per cent, then to whom does the profit belong?

Technically it belongs today to every American citizen who deposited his gold with his bank, but hardly anybody asked for a receipt and it would be difficult to find out just who deposited gold and gold certificates. Also it would be regarded as unfair to pay a profit to those who by accident happened to possess gold certificates in March, while the rest of the country used other legal tender currency.

But the profit in gold today belongs to the twelve Federal Reserve Banks, which in turn owe it to their member banks, which in turn owe it to the persons who deposited the gold and the gold certificates. To get around this difficulty some form of confiscation of the profit, either by an outright seizure or by a tax of 100 per cent on all gold profit, is being discussed. Certain constitutional difficulties stand in the way of such a confiscatory tax and it has been suggested that the Federal Reserve Banks voluntarily sign a waiver of all possible claims for the gold profit.

Until the question of gold profit is settled, obviously there can be no devaluation or stabilization. And until the investors know exactly what kind of dollars are to be issued by the government in payment of government short term certificates and long term bonds, there will be a hesitancy to invest.

To float a total of $6,000,000,000 of securities the government will have to bring about relatively stable conditions in the money markets or else depend upon a popular drive like that of the Liberty Loan flotations in war-time.

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But certainly there can be no such huge sale of bonds until the dollar's value is determined. Who wants to give 100 cents of his money today and be paid back in dollars that will buy ten per cent less a few months hence? Today the dollar is worth about 62 cents in terms of foreign exchange. If it is to be depreciated down to 50 cents, the sooner it is done and the dollar stabilized at that point the better it will be for government financing.

To wait for the dollar to reach fifty cents by further purchases of gold in the open market is said to involve protracted delay. The over-spending policy may in the next two weeks cause a drop in the dollar's value, but the first reaction to the $7,000,000,000 deficit did not cause much of a break in dollar quotations abroad.

The administration wants to accelerate the stabilization process and peg the dollar at the earliest possible moment. Just as soon as Congress gives the necessary authority to the President to confiscate the gold profit, then a devaluation policy may some day be suddenly announced. It probably will come within the next three months