The Washington times., 1935-01-24

the treasury $X$##3
want to do Lewis haney
this? You
would think that they had been
borrowing fast enough. The rea-
sons are these:
1. They want to borrow more
money than they can get by
present means. A part of the
scheme is to increase our ma
tional debt. They therefore
turn to the small savings of the
little man, and devise a sort Of
issue which they figure will in
duce more of us to lend them
money.
2. They want to become less
dependent upon the banks,
which are now loaded with
over 40 per cent of the Gov
ernment's paper. In fact, these
"baby bond" issues may put
the Government even further
into the banking business.
3. They want to get more of
their debt into some lOng-term
form. They can't sell long
term bonds to the banks, or to
large individual investors. So
they say, "Maybe the little fel-
lows will kick in"
A part of the scheme is to in
crease the Federal debt limit to
$45, ,0O0, 100000. This means an
increase of nine billion over the
present limit.
Bigger and better debts are in
accord with the times. It is a
sure indication of an inflationary
trend to find our Government
spenders talking so lightly of
"billions" that a billion means
no more to us than million
used to.
The new kind of Government
paper proposed is to be such that
banks will not want it. 1t will
be in small amounts, and will
run for 10 to 20 years.
1t will be nOn-interest bearing,
but will be sold at a discount"
This means that it will not pay
interest to the one who buys
it-Say 212 per cent each year.
Instead, you are supposed to
buy it at a price under the face
value, so that when it is finally
paid off, you will get enough to
be the equivalent of interest.
That is, if you buy $1OO
"baby bond, you may pay $7S.
Then at the end of ten years
(if you hold it and live that
long,, you will be paid $1OO in
some kind of currency. They
say that this is equivalent to
2l2 per cent a year.
Personally, I would rather get
my interest regularly as it accrues.
Above all, I am not going to
gamble on the kind of dollars
which will be in style ten years
from now. For example, suppose
7 pay $78 now for the Govern
ment's promise to pay $100 in ten
years. BY waiting ten years 1 get
$22 more than I paid. But mean.
while prices are likely to rise, say
SO per cent. Then my $1OO will
not buy nearly as much as my $78
will buy now.
1t is vain to compare us with
the people of France and Eng
land. They invest widely in
Government bonds. But the
bonds they buy are real bonds
mot discounted notes., and
their governments are financi-
ally SOunder. France pays in
gold. England'S budget is bal
anced.
Our Government is like a big
corporation which has overex.
tended itself in acquiring a lot
of unproductive properties. It
can't float much more securities
in the regular way, so it seeks to
peddle its paper from door to
door, meanwhile rigging the
market for it's other securities
by the operations of controlled
banks and Government agencies" "
and manipulating the money
market.
1t has cleared the way" for
its campaign by. forcing bank
rates of interest on deposits down,
and by making it impossible to
invest in many private securities.
But has it been strengthening
its own credit?