New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1920-05-24

cause in the decline of Liberty bonds
below parity, and its influence will be
felt until they have been absorbed by
Investors. The tremendous volume Of
LIBERTY bonds outstanding necessarily
makes this process very slow, but sub
stantial progress in that direction has,
l believe, been made within the last
year.
Scarcity of Capital Felt
The second factor which has caused
Liberty boNds to decline is the extreme
scarcity of capital, which is a natural
result of its wholesale destruction dur
ing the war. Consequently, since the
armistice there has been tremendous
demand, both from domestic and for
eign sources, to make good the capital
destroyed and to recommence and fur
Their develop the ylormal productive en-
terprises of commerce and industry.
The worldwide demand for capital, and
the high prica which domestic and for
it. enforces q lower price level for Lib
erty bonds along with other outstand-
ing securities Of paved worth.
"The decline irf bond prices has fire.
quently been charged to the prevalence
Of high interest rates. High interest
rates themselves, however, are simply
the reflection of this worldwide short
age Of capital; and encouraging saving
and discouraging non-eA sential employ
the most effective reAnedies of that
shortage. The maintenanc of low in
terest levels by artificial methods
would add nothing to available supplies
of capital, while non-essential employ
ments of capital would be encouraged
by such rates. Both the low price of
bonds and high interest rates, in a
word, are results of the deficiency of
capital which the war occasion ed. and
will be corrected as that deficiency is
made good from production and saving.
The speeding up of production and in
creased saving are the sound methods
of assuring an early return of Liberty
bonds toward parity"
People Were Forced to Buy
Mr.. Schiff said:
"The government offered Liberty
bonds and Victory notes bearing a low
err interest than other straight invest
ments. That argument was made-and
I do not say not RICH tly-that the pur-
chaser of bonds ought not expect to
get from the government the full
amount of interest ths't he could obtain
elsewhere; that it was a time of sacri-
flee and that the investor too should
make his sacrifice during the war. The
people were forced-lr orally forced
to take the bonds. A Avery large pro-
portion of them were NOT really placed
with investors, but lodged in the treas
uries of the banks. and with the
rise of interest rates IL became I'M
profitable for Subscribers longer to
carry them by means of bank loans.
"Many Northumberland corporations
too-subscribed beyond their means.
During the war loan campai gins organi-
cations competed with one another in
buying; now they are competing in
selling.
"Now it is popular to sell Liberty
bonds. I do not say the selling move
ment has yet spent itself, but l do
know that the people who are selling at
these ridiculous prices, which are with
out rhyme or reason, will live to re-
greet it. In the future people won't
believe that government bonds could
be bought to yield better than 61a per
cent"
Seward Prosser, president of the
Bankers Trust Company and member
of the Liberty loan committee, said:
"The Tribune is correct in describ-
ing Liberty bonds and Victory notes as
the safest investment in the world
and they are also at the present prices
considering both safety and yield, one
of the best and for many people the
best investment that has been offered
since the Civil War. The decline of
these bonds should arouse no sus-
picion of their soundness or of their
ultimate value. Both are assured.
These bonds may, perhaps, go lower,
but it is certain that they surely will
go higher. Moreover, as most of the
outstanding issues are repayable after
relatively short terms of years the man.
who buys them at present prices and
holds them is assured, in addition to
their satisfactory interest yield, of a
handsome profit on his investment
when it natures.
"Our Liberty bonds, like the securi-