New-York tribune., 1918-01-27

;nasticn progresses and the rate
:. interest on government loans
'.os securities Of fixed or limited
s.,,rn vii, decline, first, because the
sa,ressing purchasing power of
Wv. ,,'oney must find further expression
~ higher income on investments,
4 ant second, because the yield on
,overnment bonds sets the standard
- return on other securities; that
,s as the price paid by the govern
won't for funds goes up the yield
=, other securities will tend auto
,atical!y to rise. These are funda-
rental influences, and it may be ac-
sn,ed that the indicated tendencies
,ill prevail. 1t by no means neces-
ssrily follows, however, that the fall
!, the prices Of existing securities
rill be so great as to produce a pro
,ort;onate advance in the yields, for
i should be observed that there is
| another factor which must tend
u strongly to counteract the ones mak-
;uc for depreciation in values. That
factor is artificial disturbance of the
balance between supply and demand.
The output of corporate securities
is to be restricted; how much no one
may say, but certainly very materi-
ally British experience is that re-
striction amounts to practical elimi-
ration Of new corporate capital ap-
plicationS. Here it is likely to mean
severe curtailment, rather than
elimination, but in any event the
] supply will be relatively small. Now,
On the other side is an element which
is much more important than it may
seem on casual considera ton. 1t is
the fact that a very large number OF
investors, and particularly large in
geStors who in the past have sup
Died the bulk of tho country's CAPT
tai requirements, insist upon diversi-
fcation in Investments. From this
source the demand has been fairly
constant, even during the last year
They have, it is true, put large
share Of their funds into government
securities, and certainly they will
continue to do so. But, having done
50. they will, as in the past, use bal
snces to buy corporate and munich
pal securities. railroad, public utiI-
fy and industrial bonds and notes.
And. in the opinion of men who have
intimate knowledge of investment
conditions this demand will very
substantially exceed the supply of
new issues, and will have to be sat
isicd through the purchase Of exist
ing securities. If these compensat-
mg factors are as powerful as some
authorities believe them to be, it is
to be expected that fixed yield securi-
ties will show great resistance to
the pressure eXerted by the funda-
mental influence making for drastic,
if gradual, readjustment of values.
Having conjured up the fear that
there will be such concentration of
tax payments the coming June as to
seriously disturb the equilibrium of
the money markets, it is necessary
to find a solution for the problem.
A Stock Exchange house, through
the medium of its market letter. pro-
poses to do it this way:
In lieu of better way, and as
these arc abnormal times and credit
must bo used freely and in unusual
employments, it would be feasible to
allow tax payments to be made part
IN cash and part iii promssory
notes due at Il reasonable date later
and bearing interest.
'or ins stancc, on sums due. say,
over one thousand dollars, the gov
ernment could offer to receive one
'hlrd or one-quarter in cash and the
other two-thirds or three-quarters
IN notes at two, three and four
months, bearing per cent interest.
these notes the government could
discount at the Federal banks as
.unds were needed, and could, in
iaet' discount them at lower rate
'han per cent, thus realizing a
PROFIT on the transaction. The notes
would be probably as good when due
as the makers might bc on June Is
that 8, this method Of extending
payments would have little attend
as risk. 1t would solvo the prob
'em of dangerous money and credit
collision at a concentrated point of
time.
1t is really a good plan, only it
happens that it is entirely unneces-
saly to adopt it. Those who wish to
pay on the instalment plan can do so.
we earnestly recommend careful
reading Of the war revenue bill, par
,,lcularly Section 1909, which fol-
lows:
The Secretary Of the Treas
u'y' under rules and regulations
prescribed by him, 3hoU permit tax