New-York tribune., 1917-07-16
Save Money in Advance to
Buy Your Liberty Bonds
Prominent Banker Says if Each OF Us wall Bet ASIDE
Part Of Current Income 10 Be Invested IN ohort Term
Convertible Government Securities War FINANCE
Problem Will Be Solved Without Dis
turbing Credit Structure

Loans of that character cannot be
avoided because earnings tnat are con,
verted into savings become capital ana
are generally invested very promptly
in securities, OF property, or improve
ments TO property, so becoming uh-
available for government loans. In
general banking sense it does the coun-
try no good 70 have It's citizens sen
one kind of investment in order TO MAKE
another kind Of investment. 1t produces
no new money or credit. All buyers
of the class who have engaged them
selves TO pay loans to their banks are
forced thereafter to economic IN order
TO pay off the loans. and in that way
savings out of future earnings are
made available to the government IN
advance of the earnings being made.
Thrift Must BE Cultivated
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 fire.
ouently have no bank account ana
spend about all that they earn. Ihere
are many millions of such in this coun-
try whose material welfare Will be I'm.
proved and whose attitude toward
their government will be benefited if
thew can be induced to buy bonds. But
how can this be brought about? Only
bv showing them how TO cultivate the
habit of saving. and this kind of saving
should be developed in advance OF IN
vestnent. so as TO avoid the necessity
Of borrowing also.
] Take one industrial organization as
an example. employing, say, 2O.OOO Ia
borers. If these men earn an average
/ of 81 200 each per annum and can each
afford to save 500 per annum, their
/ employer could enter into agreements
! with them by which, say, So would be
! deducted from the payroll Of each man
every month and deposited IN bank Tor
I future investment Fifty dollars apiece
in six months is 81 600 900. During the
: process of setting aside and earmarK,
| ing those earnings or savings they could
/ be temporarily invested in short oollga-
I tions of the government, convertible az
a later date into government .ong time
bonds. BY this process no permanent
bank expansion arises. AS rapldly as
savings accumulate they are turned
over to the credit of the government,
which issues its short notes THEREFOR
and these short notes later are cor
verted into long bonds. The bank bal
ance, which was originally the pank
balance of the employer, out of which
wages were paid. has through the saw
! ings process been transferred 10 tne
credit of the government without dls-
turbance to bank credit.
Assuming that our government hnds
/ il necessary, say, every SIX months, 10
borrow large sums for war purposes,
3 ;r-b, 4tia ha arcnn1nll shed
| il all classes were induced to save IN
anticipation of such investment in the
bonds of their government The rich
! man appropriates so much OF his IN
| come. the rich corporation so much OF
! its profits. the poor man so much of his
/ salary or wages. During the period be-
: tween bond issues these savings are
! turned over to the government in in
/ stalments in exchange for short notes.
| When the bond issue comes along the
| short notes are converted into long
| bonds. The whole operation has been
! conducted without the use of cash or
reserve money, but by simple bookkeep-
| ing entries on the books OF banks,
which result in a gradual but constant
| transfer of bank deposits, representing
| the nations savings, to the credit OF
! the government.
VIII Not Cause Imitation
But the question will be asked. "Will
not this enormous transfer of bank
credit from individuals and corpora
tions to the credit of the government
itself cause expansion ?" IL will not do
so. for these credits are not created by
bank borrowings, but by savings. The
government is spending money as fast
as il receives it. The very credit so set
aside for government use must be in
stantly paid out by the government for
supplies, wages Of soldiers and sailors
and for the civil establishments. AS
soon as the credit is inscribed on the
books of the bank for the use of the
government the government checks
against it and turns it back to the very
individuals, corporations and wage
earners who have produced it. A new
credit is not created but existing credit
moves faster around this circle from
the wage Garner and saver to the gov
ernment and back to the producer and
manufacturer, and through them to the
wage Garner. The speed with which
credit moves in these operations bears
direct relation to the speeding up"
in the production of our farms and for
ests and mines and our manufacturing
establishments.
This country is confronted by a vast
problem of finance, but, fortunately,
with vast resources in gold reserves
and credit machinery by which these
operations may be handled. In furnish
ing the government with the credits re-
quired the primary necessity is for peo-
pie to save, and save in advance of the
governments requirements, in order
that bond buyers may not be required
to make loans to be repaid out of future
savings.