Alma record. (Alma, Mich.) 1878-1928, 1922-06-15

BABSON ISSUED STATEMENT
REGARDING MONEY SITUA-
TON IN l.. S.

Roger w, Babson issued the fol-
owing statement today regarding
the Money Situation.
For the past few years banks,
mortgage companies, and others en-
gagged in the loaning of money nave
been educating people TO pay high
rates of interest. Manufacturers,
business men, home builders and
others are today paying high rates
of interest which a few years ago
they believed never would be paid.
Naturally this has handicapped en-
ployment, especially building opera
tons. These people now wonder
whether this is TO be a permanent
condition or whether these high
rates are only temporary. Statistics
lead me to believe that the high
money rate period of the past few
years has passed for many years to
come. Already money rates have
declined greatly in the wholesale
market. Where-a year ago-the
banks were loaning money on call
to the brokerage houses at from six
to eight per cent they are now loan
ing at about four per cent. Even
three to six months paper can be
sold at from &c to4 afc discount.
These are tremendous changes within
a short period Of time. In fact the
change is so great Ga decline Of about
500 that it would not be surprising
IF money rates now strengthened for
short while preparatory to another
downward movement.
Money is a commodity the same
as cotton, wool, lumber, or copper. 1t
has a wholesale market and a retail
market. A wholesale price and a
retail price. Moreover, as with
commodities, the retail price in the
money market lags, about six months
to a year, behind the wholesale price
of the money market. This means
that the rates in the wholesale money
market go up and down from six
months to a year before the average
business man and home builder is
affected. 1t takes nearly a year
for cotton to get from the plantation
to the shelves of the department
store. Hence, it may be several
months before the retail cotton
goods trade gets the advantage of a
decline in the price of raw cotton. 1t
is the same with money as with cot
ton. 1t is some months after the
decline in the wholesale price Of
money before the business man and
the home builder get the advantage
in the decline Of rates. The bank
ers are not to blame for this. 1t
is economic law. AS it takes some
time for the bankers to raise the
retail interest rate for money after
uthe wholesale rate advances, so 1t
takes a considerable time for the
retail rate to decline after the
wholesale rate declines"
Being asked how this is to affect
the average man during the next
year Mr.. Babson replied as follows;
"This means that the average man
will be able to borrow money much
cheaper during the next five years
thar he has been able to borrow
during the past five years. 1t means
that there will be decline in the re-
tail price of money the same as
there has been a recline in the
wholesale price of money.
1t means that money will be more
available for the building of homes,
school-houses, roads and constructive
work of every form. Most of all 1t
means: AS the banks during the
past few years have educated the
public to high rates, the public must
during the next few years educate
themselves back again to the lower
rates of some few years ago"
General Business as reflected in the
Babsonchart is running 1870 below
normal an increase Of 1Ft over last
week. 1t is holding well in face OF
the bearish factors resulting from
the railroad ruling.