The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1918-01-20
Don't Worry About
That Liberty Bond

Washington, D. c., Jan. 19.-Some
people are worrying because market
quotations for Liberty Bonds are
ranging two or three points below
par. Liberty 3 LIS are now selling
around 90 1-2, while the four per
cent bonds are quoted at about 81.
For those unfamiliar with stock quo
tations it should be said that this
means that a 500 Liberty Bond of
the first issue paying 1-2 per cent
interest will bring $9S.50 cash in the
bond markets.
Some people, susceptible to the
whisperings of the German rumor
mongers, are wondering whether
this decline does not mean that they
are going lot lower. This parlor
panic has been increased by stories
about people who have had to raise
money quickly and were unable to
get more than $1,000 on short no.
tice.
There is no basis for such appre-
hension. The only wonder is that
the bonds have remained so close to
par against the strong combination of
circumstances that have tended to
depress them.
Consider the fact that during 1917
the prices of all bonds declined to
such an extent that giltedged bonds,
which had a market value of 500
last January, can now be purchased
for S85. The basic cause is the in
crease in prices which has greatly re-
duced the purchasing power of the
capital value, as well as the interest
yield of the bonds. The Liberty
Bonds were issued in falling bond
market and could not escape its in
fluence. Moreover, when high grade
bonds, paying 5 or per cent, are
selling 10 points or more below par,
there is great temptation for big
investors to sell their Liberty Bonds
and pick up attractive bargains in
corporate bonds.
On top of this great market
force there have been a number of
minor factors. There has been heavy
pro- German selling for the purpose
of destroying confidence in their na-
tons credit.
We must also take into account
the psychological effect of the Rus
sian situation.
Another artificial influence which
has helped to depress the market
value of the Liberty Bonds has been
the practice of merchants and others
accepting these bonds in payment for
goods at par or better. Merchants
must Immediately convert these bonds
into cash to finance their own pur-
chases. This means that banks that
bought bonds up to the limit of their
resources must take more and this
they will do only when the price will
weld them a profit. The banks
must market the bonds as soon as
possible, and this series of forced
sales floods the market. Tie mer-
chants who accept the bonds at par
or better of course protect them
selves by marking up their prices so
that profits will be as great as ever.
The secretary of the treasury has
asked that this practice be discon-
tinued and his request ought to be
needed.
Every holder of Liberty Bonds
ought to understand that Uncle Sam
will in any event maintain the price
of the bonds and while there may be
temporary fluctuations in the long
run the investor will be protected.
Don't worry about your Liberty
Bonds. They are all right and will
remain all right as long as the star
spangled banner waves. Just re-
member that a bond is an investment,
that it is not intended to be used
instead of money, and that you cant
expect to be able to sell it on mo-
ment's notice.