Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1915-07-06
RAILROAD CLAIMS
R[FUI[D IN FIGURES
PLEA THAT INTEREST RATES
HAVE INCREASED SHOWN TO
De WITHOUT FOUNDATION. z
MONEY WORTH NO MORE
NOW THAN IN YEARS PAST
Expert Employed by Western Ship
pers at Suggestion Of Commissioner
Thorns, Disputes Argument Of Rail.
roads That Money Costs More and
That Higher Rates Are Needed.
special to Times-Republican.

special to Times Republican.
Des Mcines, July 5.-What is money
worth? What is the normal, natural,
proper interest charge on money as
such, irrespective of conditions that
influence the rate, such as duration OF
the loans and security? Has the pure
money interest rate been increasing OF
declining in recent years through the
influence of supply and demand and
that alone?
1t has not been possible in the past
TO answer these questions; but one of
the very interesting phases of the
pending controversy before the inter-
state commerce commission on western
freight rates is that for the first time
a serious effort was made 90 afford a
complete answer to the questions. Il
came about this way: In the eastern
rate case it was strongly urged by the
carriers that one reason why they
should have more money on freight
rates was that their credit had been
impaired by adverse legislation and
regulation and consequently they
ought to have more revenue that they
could pay higher prices for the mon
ey they must borrow to maintain the
railroads. They made good on the
claim, since there was no way to re-
flute 1t. But when the committee of de-
tense took hold of the western rate
case it was determined that an an
swer should be furnished these ques-
tons. 1t was decided that somebody
should find out just what borrowed
money costs the railroads and how
much i. costs other people, and by in
stituting comparisons make showing
as to the correctness Of the claim Of
impaired credit.
Complete Answer Made.
Mr. Norton, young man connect
ed with university in New York City
came to Des Moines and went to work
on the matter. He was given the task
of finding out what borrowed money
costs the railroads and other people.
He did not compile from newspaper
reports but went to the bottom of
everything he touched. He produced
and gave to the interstate commerce
commission what is probably the COM
pletest showing of general credit
throughout the world ever made, a
showing of money values and money
prices that will long stand as histo-
ric production in all financial circles.
The first task was to discover, it
possible. what is the real or true rate
OF interest for money, in short. the
pure money rate. In order to arrive
at this an inquiry was made as to the
returns in interest on municipal bonds
in some twenty of the largest cities Of
the United States. Municipal bonds
are rega rded as absolutely safe. They
are in this respect on q par with Unit
Ell States government bonds. Leaving
out few cities where the fiuctuation
has been great and caused by special
conditions the price and return on
these municipal bonds reflect the rela-
ton of supply and demand for money.
But this was not deemed sufficient.
United States bonds, as everyone
knows, have an added value due to
certain concessions and privileges for
them. But they. also, should be con-
sidered. Then an inquiry was made as
to the price and returns on the bonds
Of three other great nations-Great
Britain. France and Germany.
So there was tabulated a statement
showing the actual interest rate, COM
puted on actual prices paid, on the
bonds OF the four great nations of the
world and on those of twenty leading
American municipalities. This covered
fifteen consecutive years. 1t gave the
pure money rate for those fifteen years,
and afforded standard by which to
Judge Of the credit of others seeking
to borrow money.
Urged by Thorne.
This method of arriving at the pure
money interest rate, which was de
vised and urged by Clifford Thorne,
is something that had never before
been attempted. And its absolute fair
ness was SO fully recognized there was
not a single protest against its use.
All agreed that 1t comes as near to es-
tablishing what Is the pure money rate
as any thing ever devised.
NeW what Is this pure money rate
which was thus disclosed?
The average Of the municipals and
four governments varied from 3.O1 per
cent to 1882 per cent. A United States
bond yields less, because of special
benefits, plus absolute security A
farm mortgage yields more because of
short time and need of renewal and
COST Of placing. A railroad or indus
trial bond yields more because of some
element Of insecurity and uncertainty.
In school and drainage bonds and sim
liar securities there may be elements
81 insecurity affecting credit.
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