New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1920-05-24
Rush for Funds Forces
Decline Of Liberty Bonds

OF money necessarily carry with than
decrease in the market value of the
promise to pay fixed sum of money
ae future date, with interest at a
sSea rate This has nothing at all to
40 with the question whether the
money will be paid at that future date
or not. No one doubts that it will be.
=, me obligation of the Government Of
the United States carries with it no
risk whatever 1t is certain of payment,
The market price of that obligation is
practically an indication Of the pure
interest rate at any given time, that is
TO say, OF the present value of the
date with interest in the meanwhile
1T is simply an economic law that the
decrease in the buying power Of money
or, to put it the other way around,
the increase i'll the prices of COM
modities carries with it necessarily a
depreciation in the present value of tho
promise to repay money at a future
| date.
From all parts of the country +
hear reports from banks that their
| customers purchases of Liberty bonds
and Victory notes during the past few
months, for the first time, have exceed
ed their sales. This indicates that real
investors all over the country are alb
sorblng the securities which are being
sold, IN consequence of stringent credit
conditions, by corporations and others
who purchased out of patriotism or as
secondary reserve against future re-
quirements.
"The necessity of those business
companies and business men who are
being forced to sell their securities at
bargain prices in the present credit
stringency is the opportunity of invest
/ orS.
Results of Dear Money
Just as expansion is accompanied by
a decrease in the buying power of
money and consequently of the value
of an obligation to repay money at a
future date, so defiaton will be accom-
panied by an increase in the buying
power of money and consequently Of
the promise to pay money at a future
date. Dear money results in part from
| the effort to prevent further expansion.
Naturally enough, it's first effect is to
force the best securities in the world
on the market because they are the
easest to realize upon. AS the inevi-
table defation takes place and the price
of money approaches normal again the
market price of Liberty and Victory
accordance with memorable economic
laws.
I'm the long run, therefore, the rails
ing of discount rates in the effort to
prevent further imitation will help Lib
erty bond and Victory note values, al
though the first effect of those steps,
to some extent, has been to force them
on the market out of weak hands. De-
.lation means increased buying power
| of AND of he 80
the promise to pay money at a future
date.
There can be no doubt that Liberty
bonds and Victory notes are, as they
always were, the safest investment in
the world, and that the present alb
normal credit position affords unique
opportunity to those who have or can
save money for investment in these
securities.
The Comptroller of the Currency pre-
diets that Liberty bonds will sell above
par Sin the not distant future" He
points out: "For the first time in half
century those who have money to
invest have the opportunity now of
buying the safest security on earth on
OF the investment an average income of
more than per cent per annum, or
three times as much as the interest
| paid on United States government rs,
| which in times past have sold above
par.
1t has not been many years since
United States 4 per cent bonds were
selling in the New York market at $40
or more. They, of course, had a special
value because of their circulation privi-
lege in being an acceptable collateral
at all Federal Reserve Banks, which are
specifically authorized by law to own
them and to lend on them.
"The man or woman who puts his
or her money in Liberty bonds is more
sure of the interest and more sure of
the principal than if they should lock
it up in a safe deposit box or place
it in the strongest bank. They also
receive on Liberty bonds bought at
present prices, in the shape of interest
a return twice as much as is allowed
on deposits by the best banks in the
largest cities.
Predicts Heavy Demand for Bonds
GAS the surplus income or earnings
over and above living expenses of the
people of the United States is esti-
mated at from $10,0O0,0 100000 to $15,-
| 000000,000 for the past year, it is clear
that diversion of only a moderate
portion of our enormous savings into
Liberty bonds will create a demand
which in the next few years it will
be hard to satisfy under the par value
Of the bonds.
Banking conditions throughout the
country are Fundamentally sound. The
imitation about which we hear so much
in the newspapers relates mainly to the
prices of commodities, including, un-
fortunately, the necessities as we'll as
the luxuries of life and such criticisms
apply by no means in the same measure
! to banking conditions or to the prices
of standard investment bonds or
shares.
"Those responsible for the manage
ment and direction Of the country s
financial and banking systems thor
oughly understand the situation and
have abundant resources to meet safely
any contingency that may arise. have
no apprehension as to their ability to
avert trouble and to solve successfully
whatever financial problems there may
| be before u.s."
Sees Two Factors In Decline
James S. Alexander, president Of tao
National Bank Of Commerce, director
of the Federal Reserve Bank of New
York and member of the Central LIB
erty Loan Committee, says that in
creased production and thrift on the
part of the people "are the sound
methods of assuring an early return Of
Liberty bonds toward parity"
Continuing, the banker asserted:
"No one should have the slightest
doubt as to the safety and value Of tho