The Winslow mail., 1900-01-11
AN OBJECT LESSON.
How the administration Shapes
Things to Help Out specu-
IatOrs.

For the first time in ten years the GOV
ernment is about to reduce its bonded
debt. That is gratifying, of course, but
the circumstances under which the
operation is to be performed do not
speak very forcibly for the intelligence
of our financial policy, however elo-
quently they may tell of the astuteness
of the individuals who profit by it.
The secretary of the treasury has Of
fered to buy bonds to the amount Of
$4,000, 900 to ease the money market.
He proposes to pay 1127s for four per
cents. of 1907, or III for five per cents. of
1904. That would release from $27, $780,
900 to $2s, s,167 500, 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 the government. The money
is lying idle in the treasury, and by
using it in this way we shall save about
$1,000,000 year in interest.
But how does that money happen to
be in the treasury. 1t is there because
this administration and its predecessors
issued bonds for it. The four per cents.
for which Secretary Gage is now offer
ing 112% were originally issued at par.
That is to say, the government proposes
to pay back 81 ,12S, ,750 for every ST ,000,-
| 900 it received, after having already paid
| $780, 900 in interest.
On some of the other loans the show
| ing is even worse. Four years ago Pres
ident Cleveland sold $62, ,315, 400 of four
per cents. of 1925 to the Morgan-Bel
mont syndicate at a fraction over 104
If the government should try to buy
! back any of those bonds to-day it would
have to pay 130H. 1t is not enough for
the government to buy or sell bonds
| whenever it suits the convenience of Mr..
Morgan and the interests he represents
it must also buy dear and sell cheap.
Suppose instead of this clumsy bond
arrangement we had postal savings
bank with 81 100000 of deposits.
Then, if the government had more
money on hand than it needed, and
wanted to get some of it into circula-
| ton, all it would have to do would be to
reduce the rate of interest. AS the in
terest went down the deposits would
flow out. When the process had gone on
| long enough it could be checked by sim
| ply fixing the rate of interest at the
point at which deposits equaled with
| drawals.
Or suppose we had the interconvert-
ible bond system. There would be no
premiums then and no losses to the gov
ernment on purchases and sales OF
bonds. When money became so scarce
that it was worth more than the two
per cent. paid by the government the
| holders of bonds would simply take
| them to the treasury and receive notes
at par. When they had no further use
for the notes they would take them to
the treasury and get bonds. Thus the
money market would always be easy,
and the government would never be
forced to chatter for its own securities.
The $1,046, $50 of bonds we had
outstanding when Secretary Gage made
his offer cost us $40, ,347, ,S76.S0 year in
| interest. Under the other arrangement
| the annual interest charge would be
less than $21 ZOO, ,00G at the outside, and
might run down to nothing, if the de-
mand for currency were sufficient.
What does the democratic party think
| of currency reform as one of the issues
of next years campaign ?-N. Y. jour
nal,