Norwich bulletin., 1917-07-18
NATION eHouLD SAVE
 TO BUY WAR BONDS
The Whole Population, Reserve Bank Governor Says, Should Anticipate Requirements.

on the Notation of Government loans in which he asserts that the people should save in advance of the Govern ment's requirements so that bond buy CTS will not be required to make loans to be repaid out of future savings.
 Assuming he says, that our Gov ernment finds 1t necessary, say every six months to borrow large sums for war purposes, how readily might this be accomplished if all classes were in duced to save in anticipation of such investment in the bonds of their Gov ernment? The rich man appropriates so much of his income, the rich corp oration much of it's profits, the poor man so much of his salary or wages.
 During the period between bond is sues, these savings are turned over to the Government in installments in ex- change for short term notes. When the bond issue comes along, the short notes are converted into long term bonds The whole operation has been conduct .d without the use of cash or reserve money but by simple bookkeeping en- tries on the books of the banks, which result in gradual but constant trans fer of bank deposits representing the nations savings to the credi tof the Government"
 Governor Strong says that such transfer of bank credit from individ- uals and corpora tionS to the credit of the Government would not cause ex- pansion because these credits are not created by bank borrowings but by ;avings.
 The Government" he continuesr@"is spending money as fast 1t receives
 The very credit so set aside for Government use must be instantly paid out by the Government for supplies, wages of soldiers and sailors, and for
 se civil establishments. As soon as the credit is inscribed on the books of the bank for the use of the Govern ment. the Government checks against it and turns it back to the very individu als, corporations, and wage earners who have produced 1t. A new credit is not created, but existing credit moves faster around this circle from the wage earner and saver to the Gov manufacturer, and through them to the wage earner. The speed with which credit moves in these operations bears a direct relation to the speeding up of the production of our farms and forests and mines and our manufacturing es- ta ablishments."
 Governor Strong says that there are in this country four classes of people who can subscribe for Government bonds:
 The first class of buyers" he de- clares, comprises those who have hoarded actual cash or currency In their houses or safe deposit vaults, who are induced to buy Government
 
 the purpose. Purchases of Govern ment bonds by such people (of whom there are few in the United States) have the effect of strengthening the banking position, because 1t brings re- serve money-that is, gold-out of hid ing and puts it in bank reserves, where it serves as the basis of credit. The change occasioned in the nations gen eral bank account a result is not simply to add a given amount to the bank deposits, but to also add an equal amount, dollar for dollar, of reserve cash. France, prior to the war, held a vast store of gold, tucked away in peasants hiding places, and the pro- duction of that gold in response to the Governments call has immensely strengthened it's banking position.
 The second class is composed of the capitalists and corporations with bal ances in the bank in excess of needs. When bonds are purchased by a mem Ter of this class the owner of the bank balance, MT. X. Y. z. sells or transfers that balance to the Government In eX- change for a Government bond. If the Government leaves the deposit with
 he bank which held MT. x. Y. .'s ac- count it is simply transfer of the balance of MT. x. Y. to MT. U. s. A So cash reserves shift no loans would take place in the balance sheet of the bank either of assets or liabilities.
 The third class of bond buyers is that which has bank accounts but has
 
 for investment in Government bonds. Having credit at the bank, however, they are induced to buy Government bonds and borrow from the bank tenn porarily in order to pay for them This is the least desirable buyer of Govern ment bonds, although a necessary one at the commencement of the war when the expected savings of the future must be advanced to the Government. Such a bond buyer pays for his bond out of a bank deposit which Is created by making a loan. The deposit so made is transferred to the credit of the United States of America and the bonds are turned over to the bank by the buyer } secure the bank for it's loan
 By that operation banks deposits and bank loans are both expanded and the percentage of reserve money held by the bank is correspondingly reduc- ed. Loans of that character cannot be avoided because earnings that are con verted into savings become capital and are generally invested very promptly in securities, or property, or improve ment to property, so becoming un- available for Government loans. In general banking sense 1t does the country no good to have its citizens sell one kind of investment in order to make another kind of investment. It produces no money or credit. All buyers of the class who have engaged themselves to pay loans to their banks ire forced thereafter to economize in OTQeT to pay OH the lOdnS ana that way savings out of future earnings are made available to the Government in advance of the earnings being made.
 The fourth class of bond buyers and in some respects the most important in time of war, is the great body of wage earners and salaried people. who frequently have no bank account and spend about all that they earn. There are many millions of such in this country whose material welfare will be improved and whose attitude toward their Government will be benefited if they can be induced to buy bonds. But how can this be brought about? Only by showing them how to cultivate the habit of saving. and this kind of say ing should be developed in advance of investment so as to avoid the neceS- sity for borrowing also.
 Take one industrial organization as an example. employing. say, 20, ,000 Ia borerS. If these men earn an average of 1 200 each per annum and can each afford to save $100 per annum, their