The Washington times., 1935-04-01

A%*z&* - veStorS" are be-
Lewis Haney ginning to
wonder if the position Of being
locked in with a fixed number
of dollars (such as bonds repre-
sent) is so desirable. Low money
rates are entirely artificial, and
mean neither stability nor safety
for money. and "liquidity" would
mean nothing if everybody should
want to liquidate at once.
If equities in the nations bust.
ness enterprises are not good,
what is? After all, the enterprises
which the stockholders own have
to he able to earn money if they
are to pay the bondholders.
Are bondholderS figuring on
bankruptcy, and taking over the
enterprises which issue the bonds?
Are holders of u. s. bonds figur-
ing the government taking over
the nations business enterprises?
If this be the reason why they
forego adequate interest, while
suffering the declining purchas-
ing power of their fixed principal,
they should be considering
whether their positions as future
stockholders will be any better
than is the position of the present
stakeholder.
AS to government bonds, their
sole attraction lies in tax exemp-
ton, and the sort Of "liquidity"
which comes from the necessity
the government is under of sup.
porting it's own credit. But the
fact is plain that an insolvent
debtor government can not Dor
row and forego taxes forever. The
threat of a capital levy through
currency depreciation or outright
reputation is a real one.
A government which believes
that it can pledge the assets of
the citizens who lend to it, As
the basis for note issues with
which to repay those same
citizens, may be liquid" Ger
tainly it is not solid!
The general position Of security
markets is so abnormal as to defy
positive forecasts. Money rates
in financial centers are 50 low
as to be nominal. But high.grade
stocks and bonds also offer ex-
tremely low yields. Their prices
are almost at the ceiling. Earn
ings do not justify any rise in
most low-yield equities.
Judged by normal standards,
one might conclude that the mar
ket made a peak in February.
1884, since when a shoulder"
has been made (January, 1880.
from which we may be rounding
off for renewed recession. There
are not favorable agricultural or
building situations to pull us up
as in 1924 or 1921.
But what about initiation" via
the currency depreciation route?
This seems to be the chief hope
of any general rise in stock prices.
And the chief hope of the infla-
tionistS lies in Government spend
ing, so that their queer money
may be passed.
My thought is that the New
Deal administration must go
ahead and spend or give away
enough of its devalued currency
to insure a depreciation at least
equal to the 10 per cent Write-up
of it's seized gold. Deflstion now
would ruin it politically and fl.
nancially.
I therefore favor holding, not
money or fixed claims to money,
but "real wealthy"-commoditieS
or equities in commodities.
These include the stocks Of
companies producing commodities
and lands producing commodities.
It is desirable if not essential,
however, to select those which in
volve little expense for labor or
materials. OF course, the exist
ence of large surplus supplies on
hand is not desirable. Land pro-"
ducing scarce raw m erialS,
would be the ideal.
Speculative risks have to be
run, and careful selection is re-
ouired. Highly specialized knoWl-
edge and skill are necessary in
buying land and commodities.
But probably one is justified in
assuming that the stocks of sue
cessful and well-managed cor
porations producing some Of the
metals. crude oil, or heavy chemi-
Gals, may do as well, if not de-
pendent upon competitive export
markets.