The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1920-05-01

yond its income. One often wonders
that the finances of such family may
go so far.
But the crisis is usually brief and
when it is over the family goes back to
it's modest basis of living. 1t may
even deny itself to retrieve its losses.
The countries of Europe that were
in the war financed themselves be-
yond the point where it would have
seemed possible. They borrowed from
their citizens, from America, from all
the world. The United States spent
prodigious sums, borrowed from its
people. preached the gospel of pouring
out its wealth.
Thus it performed the financial
miracle. but it created a madness for
spending, for borrowing. The nations
did not retrench when the orgy was
over as did the family with typhoid.
They had grown accustomed to waste,
to pouring out to borrowing. The peo-
pie of the nations, and particularly of
the United States, are still INDUCING
in a profligacy never before known.
Loans Based on Wealth.
The treasury points out the basic
fact that loans must be made on ex-
listing wealth. So long as the wealth
is greater than the loans, the security
is adequate, is made on a sound basis.
value of the loans issued against it,
those loans depreciate.
If a man has a coal mine worth a
million dollars, he may borrow
amounts less than a million at the cur
rent rate of interest and the paper
issues two million dollars worth of
stock against his mine, his stock will
go down to fifty. No matter how
much stock he issues he cannot make
it worth more than the wealth back
of it.
So. when the borrowings of a
country are greater than its wealth
available to pay them, its currency
depreciates. France, Germany. and
Italy have borrowed beyond the
amount warranted by their produc-
ton. If they issued twice as much
paper it would so depreciate as to have
the same value as the present amount.
The production of wealth is tho sure
way to re-establish the franc and the
mark.
The United States. the treasury
holds. has issued as many securities as
its production of wealth warrants. If
it should issue an additional two bill
lion dollars in bonds and give them to
service men as a bonus, the result
would be a depreciation in the value
of the bonds already out to just that
amount. The principle is the same as
in the case of the man who issued too
much stock in his coal mine.
The spell of typhoid fever is over
in the national family and it is time
to retrench. The nation is magnifi-
Gently prosperous but at the same time
magnificently profligate. OF its great
wealth. all the world is borrowing.
Every activity that was held in leash
during the war is working a double
shift to, catch up. 1t all costs money
and they go in the market and bid for
it, Every individual continues to live
as extensively as in the days of war
time extravaganza. People borrow
money for automobiles, pleasures, lux
uries. All issue paper against existing
national wealth. 1t is r8ore than the
wealth warrants.
Bonds Come High.
From all sides comes the demand
for money. The demand is greater
than the supply and the old law works.
The Pennsylvania railroad has a new
issue of stocks that pay per cent
interest. Before the war it borrowed
at Az. The Bell Telephone is putting
out an equally interesting offering
The bonds of China or Great Britain
can be so bought as to yield above
per cent. Cali money in New York
has been up to Is and 20 per cent
All of these demands are competing
for the money that finds its resting
place in American banks.
When the man who holds the mort
gage on your house has these alluring
opportunities to invest it at seven or
eight per cent, why should he leave it
with you at six? When the bank that
made you a>loan on your Liberties can
get a higher rate, why should it not
call in its pittance to you?
The Treasury Department believes
that the road to relief in this situation
lies past the homes of the people of
these United States. The demand for
money is too great. The people should
cease to borrow. If the call for luxury
from the people were shut off,
the supply would be adequate to take
care of all other calls. If the people
cannot be aroused to this fact, it is