The Cordova daily times., 1917-06-05
(By Associated Press)

DAN fhANNloCOs June 4. -- lne twelfth federal reserve bank district report, issued today, takes cognizance of the Liberty loan and explains in detail what effect it will have on the general financial aspect of the dis trict. A maximum of industrial activ- ity is predicted. but the crop estimate is placed at "only moderate, with gen. erally high prices" The report fol- lows:
 The offering of $2,OOO,O00,OOO Lib erty loan bonds has commanded chief attention in the past month. If each person in the United States made equal subscription, the share of each man, woman and child would be $2O, or, on the average. $100 for each fam fly. If apportioned according to the amount of deposits in banks, each bank would sell to it's customers an amount approximately equal to 10 per cent of its deposits (excluding de- posits from banks). This would az gregate $42,O0O,0O0 for San Francisco. $l8,200,000 for Los Angeles, $S,O00 ,0OO for Seattle. $6OO0,OOO for Portland, s3,3O0,O0O for Spokane, $2,2OO,OOO for Tacoma, and total of $166, ,000, ,OOO for the twelfth federal reserve district
 Apprehension that bank deposits will shrink as a result of such financ- ing seems ill founded Bonds will be paid for chiefly by checks on banks. being a transfer of balances now at the credit of individuals to the credit of the government. When disbursed by the government for services and materials the amounts will reappear as deposits of individuals. Such pro cess will inevitably increase, not di- minish, the total of bank deposits. No export of gold is involved. That payment for bonds may be a mere transfer of bank balances from one ac- count to another, and not a transac- tion in actual money is well illustrated by the fact that when the Federal Re serve Bank of San Francisco recent ly received payment from banks and individuals of $20,0O0 900 for treasury certificates sold them, the reserve bank had s600,000 less gold at the close of business that day than be- fore the $20,OO0,O0O was paid to it. payments having been made in east ern exchange.
 Our hazard would appear to be not that bank deposits may diminish under war financing, but that they may ex- --pand t6G greatly, enhancing the diff culty of readjustment after the war. If, for illustration, we assume that our total expenditures last year were $25,000,00 1000, and the government now is to spend $10,000,000 ,000 this year for war, this latter sum could be supplied, either by curtailing our expenditures to three-fifths those of last year, viz, to $15,OO0,0O 1000, and giving two-fifths, viz, $10,000, 100000 to the government, leaving the com bined government and private expen- ditures the same as last year; or, We could avoid curtailment and lend the government $10,0O0,0O0, ,O00, bringing the combined government and private expenditures up to $95,000 000, 900. This latter course would mean that we would this year pay $35,000,000 900 for the total products of all the labor of the country which were paid for with $25,000,000 900 last year, the to- tai products probably varying little in quantity. In other words, this would advance prices on the average 40 per cent. To curtail twO-fifths would be a tax equal to 40 per cent of all eXpen- ditures, but the price level would net be advanced and there would be no government debt. To increase the price level 40 per cent by cisbur3e- ment of government borrowings with undiminished private expenditure would likewise impose tax of two fifths, since as consequence a dollar would on the average buy only 60 per cent as much as before. Besides this the resulting government debt would entail years of heavy taxation to pay interest and principal, and the higher price level would intensity the diff culties of the period of contraction and readjustment and inevitably follow the exuansion.
 A middle course has been chosen, providing war funds partly by tax ation and partly by bond issues.
 Business as usual" would agra vate every evil growing out of period of expansion, causing she gov ernment to receive least value for its expenditures and hampering it at every point in the conduct of the war. Every economy in the use of the pro- duct of labor and every increase in the efficiency and output of labor can not fail to be directly helpful to the government in its war efforts and will render easier the industrial and com mercial, but it is inevitable that the |.