The Mankato free press. [volume] (Mankato, Blue Earth County, Minn.) 1879-1924, 1917-06-01
COMMERCIAL EFFECT OF
THE BIG LIBERTY loan
FRANK r.. WILSON
A r. WILSON.

Washington, May 30.-Floating a
seven billion dollar Indebtedness
within a few weeks sounds colossal,
To the minds of those familiar
with the history of large government,
tai. financial transactions, it suggests
dire possibilities. Heavy borrowing by
nations has often resulted in price
mutations and, greatly added cost of
living. Such a result might be pre-
dictcd for the Liberty Loan were it
not for the fact that precautions
against these i'll effects have been TAX
en-.
Uncle Sam now practically is in the
position of the boy who can eat his
candy and keep it. While borrowing
to an extent greater than any nation
has ever borrowed at one time, he is,
at the same time, providing greatly
increased stimulus for business within
his own realm.
It is not as if this sever billion>dol-
lars were to be borrowed and taken
out of the country for investment
elsewhere. This is to be merely a
transfer of credit, one of the con-
l. QlIlOuS VI I1c CICuIL SAtClIQCo W lOl-
eign nations being that the money
borrowed from this government must
be spent for supplies within this coun-
try. So when the United States lends
two hundred million dollars to Great
Britain, this government merely as
sembles the credit of it's people and
Flends that credit to Great Britain to
Enable Great Britain to enlarge it's
operations OF buying our supplies. So
while we are aiding Great Britain, by
giving her a lower interest ratio than
she otherwise could get, we are aid
ing ourselves by providing new de-
mands upon all of our industries, new
demands for labor, larger require
ments of raw materials and a greater
market for food supplies.
The administration has profited
from the costly experience of other
nations by outlining a policy which
provides for a combination Of bor-
rowing and taxation in order to keep
down the bad effects usually resultant
from large borrowing. The most pro-
nounced i'll effects that have come
from large borrowing have come
where nations have raised all Of their
war revenue by the sale of bonds.
Wherever a nation has undertaken
to raise its taxation proportionately
with it's rate Of borrowing, this tend
ency toward price imitation has been
reduced. The Secretary of the Treas
ury has made suggestions to Congress
for an increase in taxation which
would produce nearly two billion dol
lars annually. Germany has raised
practically all of it's war revenue by
selling bonds and has added very little
to taxation. Great Britain has fol-
lowed the customary accepted policy
of making increased taxation take
care of at least the interest on in
creased indebtedness.
But this tendency to minimize price
imitation is not the only saving grace
in the new program of war finance.
The Secretary of the Treasury, in
stead Of calling for subscriptions to
the entire loan at one time, called
for only two billion dollars at once.
His object was, manifestly, to dis
tribute the shock of the loanl Such a
program makes it possible for this
money to be subscribed; to be loaned
to European countries; to be expended
for supplies in this country and to be
again distributed to it's normal chan
nels Of business before the next in
stallment is called for. Such a plan
makes it possible to handel the Liber-
ty Loan by degrees with the least per-
icentage of business displacement.
Another provision in the making of
the Liberty Loan which helped to re-
duce the i'll effects of the minimum
was that giving the Secretary of the
Treasury authority to deposit the
money subscribed for bonds in banks
throughout: the country. 1t is his pol
icy to distribute these deposits where
the money originates. Thus again is
provided an excellent safeguard
against business displacement.
The floating of this great loan will
afford opportunity for getting a new
anchor on the savings habit of Ameri-
cans. Heretofore Americans have not
been satisfied with the low returns
provided for government securities.
They have not been buyers of govern
ment bonds. 1T is said that ]ess than
one fifth of one per cent of the people
of the United States ire ,bond owners
and of course only a small portion of
these r holders of government
bonds. In Great Britain and France
nearly twelve per cent of the people
have actually participated in the rails
ing of "a revenue by the purchase
bonds. On the basis of patriotic duty
a great many Americans will now be-
tcome bond holders and the practice
of buying this class of securities will
he stimulated.
In order to make this great loan a
complete success;t in order to mini
mize the evil effects; in order to dis
will not feel it, it will be absolutely
necessary for the people at large to
participate generously in the Liberty
gLoan.