The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1935-04-25

$$$$# n e gov
- ASE&E% eminent has
Lewis Haney made the fu-
ture purchasing power of the
dollar SO uncertain that private
investors do not want to tie
their money up in such fixed.
income securities as corporate
bonds.
But in doing these things, the
Government has made a market
for it's own bonds. Its control
over business has been bought
by loans and subsidies, made
through RFC, farm loan agen-
cieS, etc. These loans and sub
sides have been Financed" by
control over the banking system,
and the banking system has
been turned into an agency for
carrying Government bonds.
Government bonds are not be-
ing bought as investments for the
savings of the people of this Coun-
try. They are being bought by
banks, insurance companies, and
various Government agencies.
Wealthy persons buy some for tax
exemption. But none of this rep
resents investment in the ordi.
nary sense, and much of it is
under practical COmpulSion.
Government bonds pay so
little that no one would want
them except to avoid taxes, or
temporarily to hold something
which could be sold on short
notice. I'm fact, the more I'M
certain conditions get, and the
more fear there is of money,
the more Government bonds
some people buy, merely with
the idea that they can dump
this paper on the Government
quickly and get cash in an
emergency.
Some people say that Govern
ment bonds are up because
money rates are down. 1t would
be just as true, however, to say
that money rates are down be-
cause Government bonds are up.
The fact is that both are the
results of a common cause, name
ly, the huge Government borrow
ing and spending. The Govern
ment itself has put money down
and its bonds up.
In the first place, the Govern
ment has saddled the banks with
large part of its huge debt
This debt Government bondS),
the banks carry as an asset, 50
they are made to appear as haW
ing enormous supplies of credits
to lend. This supply of credit
(Which is largely Government
debit is used to put money rates
down.
In the second place, there is
extraordinarily little demand fot
business credit. Commercial loans
are actually below a year ago!
They are less than one-third Of
demand deposits!
There can be little demand fol-
investment funds under the none
tary and business conditions
caused by the Government. Even
the speculative demand is killed,
and brokers' loans are below a
year ago.
With reference to silver, Mr.,
Morganthau (of course, smiling
ly'D says, you must not BET
on u.s." That tells the whola
story! They are likely to do any
thing, and it is not even safe ID
bet on Treasury policy!
Since funds are not wanted in
business, the Government takes
them. The deposits of the banks
Qargely built on Government
debit are used by it to rig the
market for its own bonds-more
debt.
Thus, as Government debt grows
and the banks take more of it
money rates decline and Govern
ment bonds rise!
Does any one think money
rates can stay at IA of one per
cent forever? If an investment
demand for funds is ever re-
stored, money rates will rise.
But with normal per cent
rate for time money, how much
do you think a 27s per cent Gov,
eminent bond would be worth? ,
If real investments in bust
ness ever recover, the sOcalled
investments" in governments
will fall, and Government bonds
will be dumped.
Which is it to be: Poor bust
ness, zero investment, zero in
terest rates and fabulous Gov
eminent debt? Or good business
and investment, normal interest
rates, and a collapse in Govern
ment bonds?