Evening star., 1934-01-03
REDUCED INTEREST
RATES ADVOCATED
Keynes Plea to Roosevelt
Wins Approval of Amer
lean Debtors.
BY CHARLES F. SPEARE.
pecial Dispatch to The Star

Special Dispatch to The Star.
NEW YORK, January 3.-A portion
OF the open letter that John Maynard
Keynes, the British economist, has
written to President Roosevelt will meet
with the complete approval of Amer
lean debtors. 1t recommends a reduc-
ton in the long term rate of interest.
1t is frequently stated that the only
commodity not Debated during the de-
preston was money. The legal and
traditional rate of interest has held at
he old levels in spite of the abundance
of credit and the decline in open
market quotations for it,
Mr.. Keynes points out that the turn
in the tide in Great Britain followed
Just such lowering of interest charges.
This was put into effect in the sue
ceSSful conversion of the war lean. 1t
Is his belief that the rate on the long
term debt of the United States Gov
ernment should be AIt to q per cent,
or less, to be accompanied by an eX-
change by the Federal Reserve System
Of its present holdings of 'short-dated
Treasury issues for those of longer
term.
Receive Low Return
So 432 .l79, 900 of Government securities
This compares with 81 0.000.000
year ago. OF the current amount, ap-
proXimately S2,000,000 1000 is in Treas
ury notes and certificates maturing in
from 81 days to six months or a year
1t is doubtful if the Federal Reserve
banks now receive an average return
on their investment in Governments
that would be the equivalent of the
pig per cent rate proposed. The lowest
coupon on the outstanding Government
bonds is per cent, and the highest
A. per cent. This includes the fourth
liberty 4i4S, of which a small portion
has been refunded into a new series
with a. per cent payable for one year
after issue and then ga per cent for
the remaining period of II years. On
certificates and notes it ranges from
small fraction of l per cent to 81,
per cent for next DeCember'S maturity
The r. F. c.. which two years ago
next month began TO loan at per cent,
has reduced similar loans to per cent
In the same period rates on farm loan
mortgages have been readjusted in some
degree to the ruling rates for money
Favored bank borrowers have been able
TO obtain some Of the benefits of an
era Of low interest rates but. by and
large, the average borrower pays the
same rate as he did in 1928 or 1929
when the demand for money greatly
exceeded the supply IN this country,
and 1t was imported on gigantic scale.
Funds Superabundant
The fact that the R. F. c. is Offering
It's deoentureS as an investment outlet
to- those institutions that have en-
oarraSSlng excess reserves, since they
sold their preferred stock or capital
notes to the Government, Is proof that
money IS uperabundant. Further evi-
dence Of this may be had from an
examination OF the statements printed
this week Of the condition Of banks
on the last business day of 1888 These
reveal liquid assets frequently between
60 and rs per cent of deposits. With
the bank deposit guarantee plan now
effective, the layman wonders why it is
necessary to maintain such an ultra
conservative position and whether it
would not bring larger bank profits
If funds now in ShCrt-term Government
bonds and yielding little return were
released 10 normal borrowers at a con-
Cession to them in the interest rate
compared with that prevailing during
boom times
The strongest contenders for lower
money rates are the distressed real
estate mortgagors. They argue that
the difference between the statutory
rate Of 6 per cent and rate Of 4
per cent would preserve their equities
and assist them in meeting their taxes
Although money is as cheap as in the
late 90s and the early years Of this
century the prevailing rate of interest
on real estate is to per cent
higher 1t is true that many conCes-
siOns have been made by mortgages.
but mainly for sslf-protection. It was
better for them to get 3 or 4 per cent
than to exact per cent and lose all.
(Copyrisht, 1934)