New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-11-25

arrange a loan against it from
savings bank for enough to cover
the purchase price. Who now is
paying for the bond out Of his pres
emit revenues? Not /; my current
available funds are unchanged. 1t is
only the savings bank-accurately,
its depositors-that can be doing the
lending to the government-but do
ing it through me. Only when l pay
my note, perhaps years hence, do
assume the burden, and then only in
the sense of indemnifying those who
did actually carry the burden in the
war time. | now do for the savings
bank investors what the taxpayers
must some day finally do for me,
when, long after the prodigal con-
sumption Of war has ceased and the
cannon are still, even the echoes
silent-the trench scars erased and
the shell wounds healed, the lives
that met death a mere memory
the redistribution Of current incomes
and current products shall be still
going on, as the economic legacy
from an earlier day, as the memory
of tale long since told, an echo
over into a new age Of the things
from a generation past.
Where the Bonds
Are Carried
In order, then, to understand who
now is bearing the war burden it
must first be made clear that this
war burden is not in any considera-
bic measure being taken up under
the form of cash purchase of bonds
or going into the portfolios Of saw
ings banks. Nor are savings banks
and insurance companies and invest
ment companies really investing
heavily in the war securities. Where
ere the bonds, then? What is ac-
tually happening is that the bonds
are really being carried for indi-
vidual subscribers or are being car
ried by commercial banks rather
than by investment or savings in
stitutions-are being held, that is,
as collateral against discounted
paper. AS THE Annalist" reports:
"They are not locked up in safety
deposit vaults or in peoples stock
ings. The major part are
in bank vaults, placed there as Sc
curity for loans to individuals or
corporations" These individuals
have bought them, but have not paid
for them. The banks hold them, but
do not own them-merely lending
against them. The individual sub
scribers have not drawn down their
current funds available for expendi-
ture or investment; they have not
yet made any advances to the gov
eminent out of their revenues. II,
then, there is any abstaining or
waiting or advancing or any lending
anywhere, it must be the banks that
are doing the lending.
But in actual fact the banks that
have made the loans on the security
of the collateral, and have furnished
to the borrowers the purchasing
power with which to pay for the
bonds, have not parted with any Of
their resources, have not curtailed
their processes of consuming goods
or Of investment, have not saved or
abstained or waited. What they
have done is merely to compel some
body else to wait, to go without, to
economic and so to finance, all un-
Willingly, unwillingly and uncon-
sciously, the needs and activities of
the war-if, be it noted, the lending
has been done by commercial banks,
not by savings or investment banks.
These commercial banks have ex-
tended accommodation" to the Dor.
rowing bond buyers. The borrower
gives his note-with the collateral
makes his time promise of payment,
and as the proceeds of his note gets
in return from the bank its promise
to honor his checks. These bank
promises are currency, are circula-
ton, precisely as would be the bank
notes that the bank might issue. The
customer pays to the bank interest
in order to get the use of its
promises, and with these promises
buys the bonds.
How the
Initiation Came
But, in its net effect, the bank
loan was an initiation Of the circu-
lating medium of the country. This
will be easier to understand if it be
assumed that what the bank loaned
was some new banknotes that it
printed, lending out its promise to
pay, charging interest for the fact
AhnA Il 10 nro;nn into daht II Goes