The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-02-16
A Bond Issue That Means Imitation
or One That Means Sound Money.


or One That Means Sound Money.
Secretary GLASS OF the Treasury
doss not appear to have committed
himself yet to a specific plan for put.
ling through the Victory Loan Of
ono five billions of dollars. Evl.
,lently he means to be guided by con-
trolling circumstances. Mr.. GLASS
does make It clear, however, that II
Congress will give him reasonable
latitude he will take full responsible
ity for the success Of the loan. And
this Is going far. because nobody IA
rniliar with present economic and
financial conditions can overestimate
he difficulties Of distributing widely
among tho American people another
5000. 00O,00O Of war bonds
II these new bonds cannot be sold
70 the general public, II they cannot
lie thus paid for out Of the income Of
he whole people, there will be no
possible escape from further imitation
when already the costs Of doing bust.
ness. the costs Of keeping industry
going. the costs Of living. are danger
ously high.
Either the public must take the
bonds, TO be distributed far and wide
among the people, or the banks must
carry the load. If the public takes
the bonds out Of its earnings and
savings the very withdrawal of that
quantity Of purchasing power from
tho markets will tend automatically
to haul prices down from their soar.
ing levels. Our money will be sound
money. Our dollar will do a dol
lars work. But II the Government
must borrow the money from the
banks-and II It can't get It from the
people It will be compelled TO borrow
II from the banks, because 1t must
have the money-not only will infa-
ton remain, but II will become worse.
Our money will not be sound. Our
dollar will fail further to do a dol
lars work.
II to take the bonds the public had
TO borrow in part or In whole from the
banks It would be far better that the
public should do this than that the
Government should do It. At least
the public, as 1t earned and received
its income week by week and month
by month. could cut down its loans
with the banks; continuously, there.
fore, with the reduction of the loans
there would be deflation.
The Government, with its income
nowhere near enough even to pay Its
current bills, could not cut down Its
loans the banks would be indefinitely
swollen with the Government certh'
Gates that could not be liquidated,
could not be disposed of in any
way. The resources OF the banks
would become less and less flexible
tho credit of the Government would
become more and more feeble, and the
needs OF industry and commerce could
be less and less satisfied. Such q
situation would mean increasing hard
ships for the American people whose
llvings depend upon the opportunity
to earn them in active industry and
business.
Now. what does Secretary GLASS
ask Of the Ways and Means Commit
zee and the Senate Finance Commit,
tee1 He wants to be able to Ak a rate
~ interest as circumstances may re-
luire. He wants to be able to ex.
pand. n necessary, the tax exemption
privileges not only OF the new issue
hut Of the outstanding issues Of bonds
He wants to be able 20 offer subscrib.
er~, II the success of the issue so de.
mands. an option OF converting some
Of the outstanding bonds
II seems to THE Sun, II seems tc
others who have studied This prob
lem, that a mere interest rate Of IL
per cent, Az per cent, or even pei
cent. will never Of itself sell the new
issue of bonds. Meanwhile the effort
20 put them out on q Z per cent. basis
say, would slaughter the market price
OF all the outstanding bonds.
But II the Treasury could offer tbs
public a bond which ny reason Of III
tax exemption privilege and an op
ton to convert on the same basis the
outstanding bonds would appeal L
investors, the Government woul(
protect instead OF butchering tn,
value of all the Liberty Loan &c
rurities now in the hands Of the pub
lie. The new bond would have {
direct value and appeal for what 1
would be itself. 1t would have a,
Indirect value and appeal for wha
II would make the other bonds. Thu
=. interest rate Of the new issue Nigh