Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1917-02-12
UNCLE SANS BIG
TREASURE CHEST
He Has Lent Two Billion Dol
lars to Europe and Has Most
of the Worlds
Gold
BY OSCAR w. MAGNUSON

| regards business and the financial standins
Of the Government, and without stoppint
to give serious thought he will give yot
any of number of answers. They viii
range from fair to excellent. In nine case,
out of ten he is basing his opinion on tho
activity Of his own particular line. He
knows, too, In n general way, about Other
lines of tradc--his newspaper has kept him
Informed on those points. Offhand he
will be unable TO give any concrete figures
and before he bothers to get them some
| thing must occur.
That something has occurred. The break
| In diplomatic relations between the United
| states and Germany makes the study OF
| our condition extremely interesting. We
| look over the general situation and this is
! what we find: Labor and capital are well
/ employed the former to n greater extent
! than tho latter; mills are working over
| time 10 fill the large orders on hand the
| country has the largest trade balance in Its
! favor in history, and the greater part of
| the worlds gold is within our borders.
! Then, too, the fact must not be lost sight
| Of that we enjoy the distinction of being
| the wealthiest nation on the globe 1t will
he seen therefore, that our position is an
enviabe one.
Continuing our examination. but devot-
ing most Of our attention to the Govern
ments finances, find that the total
amount Of interest bearing debt is sg72 =
4G9,29o. There is an additional Indebted
ness Of S39s.2G6922, but as this carries no
interest we are not concerned with II in
the present analysis. 1t must be agreed
that this is small when comparison is made
with our resources This debt would un-
doubtedly. be much smaller were il not
Tor the fact that the majority of this is
deposited in the Treasury Department at
Washington to secure the circulation of
national bank notes.
Our Bonded Debt
The total amount of available bonds to
be used for the circulation privilege is Sgl3.-
3l7490, and of this amount S73l975,5iO
or eighty per cent, is deposited to secure ma
tional bank notes, In time as the Federal
reserve act works out the national banks
VIII lose the uote-issue function. or rather
they will find it to their interest to sur
render this privilege to the Federal Re
serve banks. When this is accomplished we
can go on and reduce our Indebtedness.
In the event Of war declaration or
concerted move for military and naval pre-
paredncss, money would he needed. Along
this line loan Of $500. 900, ,OOV has been
spoken o. tut no definite action has been
taken by Congress. This loan would bring
the interest-bearing debt up to $l,472,469,-
290, and the Indebtedness per head of
population would be a trinc more than
SIZES. While we are on the subject of
per capita Indebtedness, it is interesting
To note that the total amount of money
in circulation on February | was SI49S,-
06O,S7l, per capita circulation Of $3.50
II will be seen therefore. that there would
be n lecway of S30,22 between the ndebt-
edness and the money i'm circulation.
Let us get back to thesdiscussion Of what
the Government would he compelled to pay
for money. 1t must be remembered that
the ilotation by the Government would come
time 0f RAnprallN hip1 intprpCt toe
for loans, especially on loans TO foreign
governments. neutral as well as belliger- |
ents. since the beginning of the European
war. In that period foreign governments |
have borrowed more than S2,1OO, 900 900 |
here, and for this they have paid from five |
per cent to six and n half per cent with the |
yield to investors based on present market |
prices, considerably more
Our Government would not have to nav |
this much our bankers and investors |
would not let such thing occur. |
IT is felt that three per cent bonds could |
be foated at par. A rate of three and one |
half per cent has been mentioned in inan-
rial circles, hut this would have a depress- |
ing influence on other Government issues
as money. unless the risk is large will |
always hit the investment level ruling at
he time. conversion feature, giving the |
holder right to convert at par into bonds
of later issue at a higher rate would |
the success of the loan. II would
add a speculative feature and the Ameri-
IAN public likes anything which has a
speculative angle to it. A feature which
must not be lost sight of is that the Gov
Prnment bonds are exempt from all taxes,
national or State
The Price of Money
The highest interest rate now paid is
four per cent. being for the loan OF 1925,
maturing and redeemabe after February /
# that year. The amount of this loan out
standing is SllS,4S9,9OO, and of this sac
'O4,SOO, or twenty-seven per cent is de-
posted to secure national bank circulation.
n look into the past on Government
oans is not out of place at this time The
oans of the Civil War with the execution
# skies of 81, of which SlS.415,OO0 were
'old at an average price of S9O3, were all
placed at par. commissions ranging from
'ne-eighth Of one per cent to one per cent
we're allowed TO the bankers who distrib-
lted the bonds. The bonds sold to carry
N the Spanish-American War were sold
It par ana were Immediately quoted at
'remulp.
The rate Of interest paid in some instances
Turing the Civil War was Very high The
,verage nomnally paid at that time was
llmost exactly six per cent. Payment was
'eceiyed in actual currency, and this made
he actual rate much higher, because of The
'alue of gold, in 1862 the average gold
'alue Of United states notes was $50 per
'ent, and this resulted in an actual rate OF
interest for the bonds of about So per cent
1he value of the currency dollar in 1864 had
leclined to 3S.7 per cent, at which price II
ema med a greater part of the year making
he interest rate on bonds approximately
8 ~ per cent. Those were abnormal times |
however, and il is probably safe to say that
hey will never recur. The national bank
ict, which was passed by Congress in 1863.
irving the country its first organized bank
ng system, had not got fully to work by
hat time.
While the institutions which operate under
state charters, taking in the State banks.
rust companies and savings funds, are not
lnder the jurisdiction of the Federal Gov
yet their method of organization
S patterned along the lines of the national
'ank act. Now there are more than 27,5OO
scattered over the country The
atest available figures give the resources
4 these Institutions at about $35 000, ,OOO, 900
n increase of approximately $500, ,OO0, 600
ince the beginning of the European war,
The balance of trade In favor of the |
Tnited States In the fiscal year 1915 was
. 2,135,775,355 and in the previous year