Arizona republican., 1917-06-03
BANK EXPLAINS
 LIBERTY JOAN
 SAVING EFFECT
IRepublican A. p. Leased wireI

SAN FRANCISCO. June D. The Twelfth Federal Reserve Bank District report issued today takes cGgnizance of the Liberty Loan and explains in de tail what effect it will have on the general financial aspect of the district. A maximum of industrial activity IS predicted but the crop estimate is placed at "only moderate, with gener- ally high prices" The report follows;
 The offering of s, ,00C 100000 Liberty Loan bonds has commanded chief at .ention in the mast month. If each per son in the United States made equal subscription the share of each man, woman and child would be S20. or, on the average, $100 for each family. If apportioned according to the amount of deposits in banks. each bank would sell to it's customers an amount approX1- mately equal to 10 per cent of its de- DOsits excluding deposits from banks.) This would aggregate 2090.000 for san Francisco S1S.200. 0D0 for Los An geles. sSG0O, 900 for Seattle S6,0O0,0 900 for Portland. S3.300.000 for Spokane, $2 100000 for Tacoma. and a total of S166, 600 GOO fo, the Twelfth Federal Re serve District.
 Apprehension that bank deposits will shrink as a result of such financing seems ill founded. Bonds will be paid for chiefly by checks on banks. being a transfer of balances now at the credit of individuals .C the credit of the gov crnment. When disbursed by the gov. "rnment for services and materials the amounts will reappear as depOsits of individuals. Such q process will in evitably increase, not diminish, the total of bank deposits. No export of gold is involved That payment for 
 balances from ont account to another and not transaction in actual money is well Illustrated hy the fact that when the Federal Reserve lank of san Fran cisco recently received paymefft from banks and indhiduas of 2G.1e0.00J for treasury certificates sod them the re- serve bank had S60e9 900 less gold at the close fbusincss that day than before the S20,C00,000 was paid to it, payments having been made in eastern exchange
 Our hazard weuld apTear to be rot that bank deposits may diminish under war financing but that they may eX- pand goo greatly enhancing the difficult ty of readjustment after the war If for illustration. We assume that our to- expenditures last year were $25, ,000. = v0O,UJV. and the government now is to spend S43,O00O 0OC0J00 this year for war thlS latter sum could he supplied, either by curtailing our expenditures to three iuthS those of last year. viz: to S15.- OeooO0eOO, and giving tWO-fifths, viz: SlO,O0O O0Oo00 to the government. Ieav- ing the combined government and pri- Nate expenditures the same as last year or, We could avoid curtailment and lend the government $10.000. 900 coo bringing the combined government and prlVate expenditures up to $35, ,000 0G0 = eOU- This latter course would mean that We would this year pay S35 00O. - oOo.-ne0 for the total produces cf all the labor of the country which were paid for with $25.000.000, 000 last year, the total products probably varying for lutie m quantity In other words. this would advance prices on the average 70 per cent. To curtail two -fifths would 'c tax equal to 40 per cent of all ex- penditures but the price level would not be advanced and there would be no government debt. To increase the price level 40 per cent by disbursement of government borrowings with undimin- iShed private expenditure would like wise impose a tax of two-fifths, since as consequence dollar would on the average buy only 50 per cent as much as before. Besides this the resulting government debt would entail years of heavy taxation to pay interest and principal and the higher price level would intensity the difficulties of the period of contraction and readjustment and inevitably to follow the expansion.
 A middle course has been chosen.