The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1918-04-17
Wayne's Lesson for the Nation

Wayne's Lesson for the Nation
Laymen who are not students of banking ar
probably at loss to understand the Importance
attached by the Wayne County Liberty Loal
committee to selling the bonds directly to TIN
people and urging the banks not to subscribe.
The reason is simple. Banks are reservoir.
for the peoples money. Properly managed banks
keep their resources in what is known as liquie
form. That is, deposits the peoples money, are
always flowing mainly in two directions. To the
people as they check out for their financial needs
and to the business men as they borrow, on gooc
security, for their merchandising or manufactur
ing necessities.
These loans to business men are for short
periods, rarely over six months They repre-
sent commodities and products purchased OF
manufactured that will find market within the
period of time covered by the loan and thus en-.
able the loan when due to be promptly paid.
A subsidiary function of banking is to fl
nance, not own, the permanent investments fol-
the peoples savings. Permanent investments
stocks and bonds, under normal conditions are
simply long time loans to business men. If the
banks own these long time loans the fluidity of
their resources is impaired and unsound
banking condition results; loans are not repaid
rapidly enough to care properly for the usua.
volume of short time commercial loans or deposit
withdrawals.
Consequently banks are justified in financ-
ing investment issues loans to stock and bond
Dealers only to the extent of the surplus of their
resources above the amount necessary to take
care of the needs of their depositors and CONNER
cal borrowers These loans are also short time
loans, running only long enough to enable invest
ment dealers to sell their securities to the ma
tons savers.
Today our government has taken the place of
business men in the issuance of securities. Gov
eminent has gone into tremendously import
ant business, the business of waging war on
Prussian barbarism. To properly equip itself for
carrying this enormous business operation to a
successful conclusion, government has to borrow
and keep on borrowing untold. billions on long
time loans.
Essential industry and commerce, however,
must go on just the same. Therefore, govern
ment long time loans must be regarded, in their
relationship to sound banking, in the same way
as the business mems long time loans. The banks
The savers of the naton-and these should
rightly be termed it's saviors along with the boys
at the front or in training to go there-must buy,
pay for and own and keep these bonds.
During the present Liberty Loan campaign
community after community is lauded it
"goes over the top" with it's quota of bonds Sold
Analyze the subscriptions of these communities
however, and you find their banks are heavy
subscribers. OF course, in most cases these
banks have subscribed with the idea of being
able to sell the bonds again to savers and thus
maintain the soundness of their banking posi-
tons.
If such banks fail in their object with this as
well as with the successive Liberty Loans that
must come in the future, then the nations bank
ing position will become unsound. To avoid
downright insolvency it will be necessary to res
urrect that old civil war expedient, bond Sc
cured currency with all it's attendant evils. In
flation will raise both prices and wages long
as such a currency expands with additional bond
issues.
With the coming of peace and not only the
cessation of bond issues but also the beginning
of repaying and retiring bonds issued. will come
deflatjon and its accompanying ills. Prices and
wages will fall causing failures and dslocation of
Ir~b n:11o, H.