The times-news. [volume] (Hendersonville, N.C.) 1927-current, 1938-04-29
CREDIT is NOT MAGIC"

The above caption IS taken dS d te|>I Aoi
the presentation of his views on the pres
ent nationwide business situation by zen.
Hugh Johnson. Gen. johnson always pre-
SCENTS his views and conclusions in force
ful and understandable way. In this case
he presents a picture of existing conditions
which will certainly help to an understand
ing of the situation. Primarily, that IS what
the country must have before prevailing
sentiment can be mustered in support OF
THE only program which promises the
smallest CLEAN of hope for the future.
AS The Times-News pointed out yester-
day in presenting some suggestions of the
country's business men, there is no mystery
surrounding the problem of What ails the
country" Any business man, big or little,
can offer the solution to the new deal rid
die. General Johnson clarifies the atnos-
phere with few paragraphs which 1t IS
more than worth while for every citizen to
read We quote Gen. Johnson:
Business prospects so poorly defined that
people are not inclined to borrow any more than
to lend. That is the whole trouble with the
have to do to aetivate business is to provide an
abundance of credit at very low rates Of interest.
We have had that for years. 1t needs one other
element to make it work-confdence in the fu-
ture When you have that, of course, the theory
is bound to work-the more credit and the lower
the rate, the more initiative can be released and
the quicker business will boom. But if there isn't
confidence, mountains of cheap credit are just
about as useful as more ice for the Arctic If
there were that confidence now, the government
wouldn't have to loan any money because there
are plenty of banks with an abundance of money
to do that
There is an exception to all this in par
ticular field 1t is not the function of banks to
lend money that can only be repaid in from three
to FIVE years The government can fill need in
that field if it can find any borrowers.
If you were financing big manufacture
ing business tomorrow and things were as they
used to be, you would expect to get your money
in possibly all of four ways
For your factory buildings which can take
years to pay for themselves, you would get a
part (say so per cent? by selling long-term mort
gage bonds For your machinery which will wear
out and have to pay for itself sooner, you would
get part either by short-term debentures-3 to
years-or preferred stock. Four your inven-
tories of materials and supplies, and the credits
you grant customers, which turn over in a few
months or year, you would count on bank loans
to carry their peak loads. For all the rest of the
money to pay for the basic inventory and the
equity in plant or machinery, you would sell COM
mon stock
This is the traditional and proved way to get
business started. There is practically no other
way Just now, due to too much fear and caution,
three of these approaches are practically out 1t
is almost impossible to sell common or preferred
stocks, bonds or debentures to start new enter
prses. That is both a cause and an effect of
our business paralysis. The only open financial
door is bank credits. The governments action
may add some credits in the intermediate field
for three to five years and provide for some in
stalation of machinery and equipment But this
surely will not do the trick of recovery or even
help very much to bring it back
Only one thing viii do that restoration Of
confidence to reereate active financing in all four
of the fields just discussed That seems less like
ly every day. The runor around this town is
that for this campaign, the President is going to
abandon his long held position slightly left of
center" and ride hell-for-leather toward the rud-
dy left. No restored confidence lies in that direc-
ton. 1t looks like bloody war and a sickly
season. -..
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