The Bemidji daily pioneer. [volume] (Bemidji, Minn.) 1904-1971, 1922-07-22
Statistic Advises Purchase
Of Municipal Bond. at
Present Levels @
BELIEVES DECLINE IN >2..5
INTEREST IS PERMANENT
General Business Now Stands
IS Per Cent Below Normal
Improves 4 Per Cent

Wellesley Hills Mass, July 20 Is
While discussing the opportunities in
the present bond Market Roger w.
Babson, the statistician, today made
the following statement regarding the
future Of municipal issues. -
"The past few years. says. Mr..
Babson, "have been hard for cities
and towns desiring to borrow money.
During the war an unwritten ban was
placed on municipal borrowing and
unnecessary public building. Di-
rectly after the war money was
scarce and the rates were high. It
has only been within the last few
months that cities and towns have
been able to secure what mbney
they have desired s at a fair rate.
Municipal fathers, contractors and.
investors are now wondering wheth-
er the present decline In rates is
temporary or will extend over sew
eral years. -: IL
Study of the situation leads me
to believe that the present decline
in interest rates will continue and
that cities and towns will be able to
to borrow freely during the next
few years. 1t even looks as if the
city fathers will soon be solicited by
bond houses for issues to SELL. Up
to the present time city officials have
been obliged to hunt up banks to
buy their securities. The time will
soon come when The bankers will be
sending buyers throughout the coun-
try to hunt up bond issues. that they
can sell, The next few years will
see a scramble for bonds on the
part of the dealers Tar greater than.
than any previous scramble for mon
ey on the. part Of cities and towns.
The law Of business cycles still ops
crate. AS we have had years of adj
vancing interest rates we will have
years Of declining interest rates.
Moreover, these cycles cannot be sus-
pended or changed any more than
we can change or suspend the tides
Of the ocean. T.. r.
i Elm addition to the law Of bus
mess cycles, the tax situation is very
much in favor of municipal borrow
ing. Before the days of income
taxes and sur taxes, bonds Of our
best cities sold on a 81 per cent
basis, and even better. Now, when
wealthy men are obliged to pay sur
taxes Of from 80 to SO per cent these
tax exempt bonds of cities and towns
should be in great demand. Some
Of my associates even state that
many of these bonds may 60 up
until they are on q 2 " per cent
basis. or less. Of course this also
applies to the government bonds, al
tho the government bonds are rather
short time and therefore not so. at
tractive to the investor. !; Cities and
towns will temporarily be greatly
benefited in their borrowing by any
amendment to the Constitution max
ing all bonds taxable. If such a
legislation is attempted, there nat
urally will be lot of tax exempt
bonds put on the market just pre-
ceeding such legislation. Some feel
that such a flood Of securities would
depress the price, but others believe
that if they are to- be the last of
the tax exempt securities, the mar
ket will absorb easily all they offer.
Whichever is the case, cities and
towns will have no difficulty in dis
posing Of their securities during the
next few years, and the interest
g.. Continued on Page 8.)
TElan0n Adv CCnAn LTIAN 1