The Kinsley graphic. [volume] (Kinsley, Kan.) 1890-1940, 1899-11-24
A Financial Object Lesson.

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For the first time in ten years the
government is about to reduce its
bonded debt. That is crafty ing. of
course, but the circumstances under
which the operation is to be performed
do not speak very forcibly for the in
telligence of our financial policy, how
ever eloquently they may tell of the
astuteness of the individuals who profit
by it.
The secretary of the treasury has
offered to buy bonds to the amount OF
S25, OOO, 600 to ease the money market.
He proposes to pay 1125 for A per
cents of 1907, or Ill for 5 per cents of
1904. That would release $27, $50 600
S2S, 1877, 500 if the bondholders should
avail themselves of the offer to its
fullest extent.
Looking at the matter merely with
reference to the present point of time
the secretary's proposition is advan-
tageous to thegoyernmsnt. The money
is lying idle in the treasury, and by
using it in this way we shall save
about a million dollars year interest.
But how does that money happen to
be in the treasury? 1t is there be-
caus this administration and its pred
ecessors issued bonds for it. The 4
per cents for which Secretary Gage is
now Offering 1l25 were originally is
sued at par. That is to say, the gov
ernment proposes to pay back 81, 128, :
$50 for every million dollars it re-
ceived, after having already paid
$3.50, 600 in interest.
On some of the other loans the show
ing is even worse. Four years ago
President Cleveland sold $62, 315, 400 of
per cents of 1925 to the Morgan-Bel-
mont syndicate At a fraction over 1O4.
If the government should try to buy
back any of these bonds to-day it
would have to pay 1904. It is not
enough for the government to buy or
sell bonds whenever it suits the con-
yenience of Mr.. Morgan and the in
| terests he represents must also buy
dear and sell cheap.
Suppose, instead of this clumsy
bond arrangement, we had postal
savings bank with 81 ,OOO, ,OOO. 900 OF
deposits. Then, if the government had
more money on hand than it needed,
and wanted to get some of it into circu'
lation, all it would have to do would
be to reduce the rate of interest. AS
the interest went down the deposits
would flow out When the process
had gone on long enough it could be
checked by simply fixing the rate O
interest at the point at which deposits
equalled Withdrawals.
Or suppose we had the interconvert
ible bond system proposed in th'
Journals 1rternal Policy. There
would be no premiums then and nj
losses to the government on purchase
and sales OF bonds. When money be
came so scarce that it was worth NOR
than the per cent paid by the gov
ernmen:, the holders of bonds woult
simply take them to the treasury AM
receive notes at par. When they ha'
no further use for the notes they woul
take them to the treasury and ge
bonds. Thus the money market woul
always be easy and the governmen
would never be forced to chatter TO
; it's own securities.
The 81 ,046, ,04S, $50 of bonds we ha
outstanding when Secretary Gag
made his offer cost us $40, BAT, S76
year in interest. Under the other al
rangement the annual interest charg
would be less than S21 600. 600 at tn
) outside, and might run. down to moth
ing. If the demand for currency wer
sufficient. York Journal.