The Cordova daily times., 1919-03-28
DRIFTING, JUST DRIFTING

rect Way-ls by an issue or DOnds,
 notes or obligations having definite
 maturity. The other-the indirect
 way-by an issue of paper money. The
 latter is sometimes called an "invol-
 untary loan," the quality of compul- sion arising where the government
 issues irredeemable paper money pay able after an uncertain event, say the
 end of war. This quality of com
 pulsion, however does not exist where deem in gold the notes which it forces
 upon it's creditor.
 But issues of paper money whether
 they be voluntary or involuntary loans,
 have this common characteristic: If
 they are issued in greater amount than the business of the country re-
 quires, they produce imitation. Busi- ness is unduly stimulated by the cheap | ness of money; the signs become in-
 evitable that prices are going higher; | everybody begins to buy for the rise;
 money itself taking on Appreciated
 value, and we have before us an era
 of rising prices, inflated values, an eco-
 homie situation which is thoroughly
 artificial and unsound, and which has
 hidden within itself dangerous ten
 dencies and probabilities.
 For this reason it is plain that the
 best way for a government to borrow
 money is by the direct way. Loans made to the government are sound when they represent savings and the method of payment is perfectly sound when it, too, represents savings in the form of taxes. All of this is very ele- mentary, no doubt, but if there ever was time for the American people to realize it, it is the present. Per haps the same thing might also be said of the banks; for it is ques- tion if they do sufficiently realize it, as the time draws near for the rais- ing of the largest loan which nation was ever called upon to raise and un- der conditions which, to say the least, are not propitious.
 Everybody realizes that the motive of patriotism, which so materially helped across all other loans growing out of this war, is so far lacking to this forthcoming Victory loan. The next thing to say, then, is that it should be made an investment propo- sitions pure and simple. That is very easily said, but what about the effect upon all other existing investments? They can not compete with govern ment obligations bearing a high rate of interest On one side, therefore, the matter must be watched that there be not caused slump in the invest ment market.
 We hear it said: "The banks have all the money in the country, and they should make this loan.' We'll, the banks can do it. How can they do it? By turning six or seven billions of their deposits into bonds? No, that would manifestly be impossible, not withstanding the wise remark we have just quoted. The banks of the country could not turn such proportion of their deposits into fixed investments and continue to administer to the busi- ness of the country. They would have to get rid of the bonds, which they would do by rediscounting them at the Federal banks, taking in their place Federal Reserve notes, or what is the same thing, credit for them at the Federal banks.
 What has been accomplished? By an indirect means the government has raised it's money by issues of paper money. There are six billions of bonds in the Federal banks, and there | are six billions of currency added to the money of the country. Can this | spectacle be contemplated without ut ter dismay? What becomes of this iri- descent dream, getting back to nor nal? Is there gold enough in the country to act as cover for such a deluge? Perhaps there is, but what becomes the effect when this gold be- gins to leave our shores? Is our boasted Federal Reserve system capa- ble of handling any such proposition? it was not created for any such purpose. It was created to han dle in scientific manner the busi- ness of the country, and it Is doing it, grandly doing it. But it was not cre- ated to become the agency of govern ment borrowing in simple stagger- ing amount
 We are no alarmist, but this is the time when the plain truth should be spoken, not merely by those who in their sanctums view the battle from afar, but by the bankers of the coun- try, who will have to face the music. Thov ahnu1d horin now tn annrociafn Q