Omaha daily bee., 1910-03-06

Inc Flow OF capital.
The main controversy preoipitated
over the postal savings bank bill
seems to center about the conditions
that are TO surround the investment
Of the money to be deposited with the
government. II is practically agreed
that the savings bank accumuiations
should be redeposited with the nearest
bank OF the locality that shall be quail
fled as a government depository. To
make sure that the constitutionality
of the law may not be successfully as
sailed, the president and his advisers
have urged that the government al
custodian Of this money be given dis
erection to invest It in government
bonds, there being no possible question
about the constitutional right of the
government to provide all the neces-
sary machinery to float its loans and
protect its credit.
It strikes us that altogether too
much stress Is being put on the ne
cessity OF keeping the savings bank de-
posits in the immediate locality OF the
original depository. theoretically, cap
ital is like the liquid contents of a
huge reservoir which flows to what
ever point II is most needed and can
be best utilized. OF course, the actual
flow of capital is not exactly what 1t
is in theory because much friction and
many obstacles interfere with its free
removal from one place TO another,
but that this tendency is strong and
the transfer of capital constantly in
progress to a measurable degree is
established beyond dispute. The
amount of liquid capital in the reser-
voir may increase or decrease from
time to time, but If It is taken out Of
one spigot or another it seeks a new
equilibrium and regains its level.
So whether the savings bank depos-
its are invested in bonds by the gov
eminent or whether they are rede-
posted in local banks and by them In
vested in bonds, or whether they only
reach the stage of bond investment by
two or three series of ~Tedeposits, the
effect in practice will be substantially
the same. For a parallel we need only
look at the money which is paid in as
premiums for life insurance and held
in reserve by the big life insurance
companies. These life insurance prem
iums are just as much savings deposits
as would be straight-out savings ac-
counts, Several states have undertaken
to require the investment OF the money
paid in by policy holders to be loaned
out or to be invested in securities in
the same states, but no noticeable adj
vantage has been reaped from such
laws. If insurance money stays in the
states where the premiums are paid,
1t simply takes the place of other CAPT
tai to go elsewhere. Where the state Is
a borrowing state it may facilitate the
inflow, but where the state Is a lending
state it cannot permanently check the
outflow.
Students of political economy are
generally convinced that it would be
highly desirable to have a natural flow
of capital without artificial obstacles
in the channel, Just as II would be de-
sirable to have a similar automatic
distribution Of free labor so that it
would relieve unemployment at one
point and supply the demand for labor
at another, 1t seems to us, therefore,
that the contest over the postal saw
ings bank bill is turning on really its
least vital feature, and that the scope
of redeposit and investment of the
funds would be of minor consideration
except for the bearing it may have on
the point of constitutionslity,