The Rock Island Argus and daily union. (Rock Island, Ill.) 1920-1923, 1922-06-28
Frederick Haskin's Letter
Il especial csr,uupoudencr
THE PROBLEM OF THE BONUS

The president and the treasury
stand firmly against a national
bond issue to pay the bonus be-
cause such q move would at one
stroke set the country back several
years in it's effort to catch up on
the war debt. To issue bonds to
be bought by the public would
mean that the whole country would
understand the treasury's position
had been weakened by the amount
OF the bond issue and the market
prices of Liberty bonds of all the
war issues would drop to lower lev
els. Suppose the list of bonds on
an average dropped five points.
This would mean the people who
now own these bonds would sustain
a paper loss of $1,000. 100000 or
more. This loss would not become
actual unless the holders had TO
sell their bonds but many would
encounter emergencies which ne
cessitated their sale.
Higher Interest Rates.
A further effect of bonus bond
issue would be that the general
level OF interest rates would in
crease because of the increased
competition from the government
The demand for money would be
increased by the amount of the
bonus. This would mean that every
one who had to borrow money for
the next two or three years would
have to pay from l to per cent
higher interest. In the aggregate
this would mount to several bill
lions. Therefore, the opponents OF
the bonus say that to borrow mon
ey and pay it now would cost not
the amount of the bonus itself, but
two or three times that amount
The opposition of the plan of Civ
ing the veterans certificates upon
which they could borrow at the
banks has been even more spirited
than that to other schemes. The
reason for this is that the veterans
would make a sudden demand on
the banks for so large a sum OF
money that this increased demand,
in pursuance of the natural law Of
supply and demand, would pro
duce a condition of competition
whereby the general bank interest
rate would be increased. The sup
ply of lendabIe funds would be
pressed upon so heavily that peo-
pie, other than soldiers, desiring
loans, would be forced to pay high
er rates of interest
These are the principal economic
objections to the payment of a sol
der bonus. There are economic
gains to be set off against them, &C
cording to supporters of the bonus
legislation.
1t is pointed out that the bene-
ficiaries of the bonus would nearly
all use their money in some way
which would stimulate business.
Some would deposit it in banks, in
creasing bank deposits and there
fore strengthen the banks 10
meet the demand for loans. Others
would spend their money in a brief
period for goods. To be sure some
of these purchases would be of
non-ess ential luxuries, but how
ever expended the money would be
passing into the channels of trade.
More cash in trade is what the ma
ton needs to give the last big push
to get business out of the slough Of
in which it has found
cred for the past two years. Some
of the supporters of the bonus de-
clare that instead of an evil, pay
ment of the bonus actually would
prove a benefit to the country as a
whole by starting the wheels Of
trade moving rapidly to provide the
four or five billion dollars worth
of goods which the soldiers would
desire to buy with their bonus
That many soldiers would avail
of land settlement
bonuses is doubted. It is agreed
that many would want to acquire
real estate but they would want TO
select certain land not available
from the public domain, such as
city lots, part payments on houses,
and such property. Therefore, they
would take the cash from the gov
eminent and spend the money for
land OF their own choosing.
The bonus promises to be one Of
the principal subjects Of debate in
for some weeks to come
and if consideration is given TO the
economic effects which the differ
eDt sides say will be felt, the pub
lie will be in a position to form
fairly accurate opinion Of what 20
expect in the business world when
the bill finally is passed-or de
feated.