Imperial Valley press., 1939-05-25

ION uifh them whereas ten years
san a conservative investment fund
mlahf weld S pcr cent today u
Yields buf 2 90 pr cent kankerS
prefer United states Govern
ments because they are exchange
able into d6ilar bills at ans time
A banks only obligation Is 10 pay
dcpogitors dollars regardless Of
what the purchasing power Of these
dollars viii be Trustees TOO. are
buying Governments because they
feel the price of these bonds will
hold up
I seriously question the action OF
both trustees and bankers on two
grounds FIRST. believe that in
tercst rates will eventually ad-
vance Either a business boom or
war would increase money rates
and shove down the high price Of
Governments Even If the price
did hold up. the purchasing power
Ct their income and principal would
decline Buying government bonls
therefore may be as risky buSi-
ness today as was the buying OF
common stocks in l92s-except for
those who want ready funds with
which n meet death taxes.
Registration Would Re Embarrassing
The second reason why I queS-
ton the purchase Of government
bonds is the financial status Of the
II ffnnEn
bonds had 10 be registered with
the Securities Exchange Commis-
sion in the same way that private
bonds must be. doubt If many
could be marketed Such regis
tration statement would have %
show that the U s. government
has not even earned operating cx-
1enses for ten years What cor
poratiOn could get bankers to pay
a premium for It's 2 per cent bonds
If IL had only earned half Of its
operating expenses for eight con-
secutive years.
Yet. good corporation bonds can
be bought to yield 4 per cent. These
are obligations Of well-run COM
panies manufacturing or merchan-
dising useful products Ultimately.
the future of government bonds de
Dends upon the making of money
by these private companies. Interest
on government bonds Is paid out
Of taxes. Corporation income tax
cS are the most lucrative form OF
taxes. These are not collected m-
Ill tho interest on corporation bonds
is paid Hence, M corporation
profits no taxes Therefore. from
a security standpoint. these cor
noration bonds should be excel
lent.
Reputation or Initiation
Bankers and trustees must real
ze that federal debt ran be reduC
ed only in two ways: IL By out
right Reputation (which means
simply cancelling the debit or 90
initiation (Which has the same ei-
feet in a roundabout way Be
cause they are buying government
bonds. however, these bankers and
trustees feel that when repudia-
tion or initiation ultimately comes
the public will not blame them
Despite their hatred Of the adj
ministration's financial policies
and I suppose no group hates the
New Deal morel these bankers and
trustees do not have the quits "a
refuse TO buy government bond,
and put a stop TO the whole miscr-
able mess Some Of them tell me
You can't definitely say that We
will have initiation or reputation
, Mr.. BabSon. 1t is not yet clear
that we will Well perhaps not
1t is not yet clear that Christmas
is coming again, either. ask these
men, How can current public
debts ever be paid off"
National Tax Strike?
Some answer, They do not have
TO be paid off so long as they do
not get any bigger Ny retort is
that public debts will continue 70
multiply unless public spending IS
slashed or taxes boosted Can fed
erel spending, for instance, ever be-
reduced so per cent? Anyone who
thinks it can be cut should just
review the history Of the present
session of Congress. 1t was widely
advertised. as an economy session.
A week ago the Senate passed the
largest farm appropriation bill in
history by vote of 81 to Ia! Taxes
can be increased easier than. spend
ing can oe reduced. However. if
taxes are pushed much higher
fear a national sit-down strike OF
tax payersl
Meanwhile, the lazy public goes
on voting for the Pied Pipers who
got us into this jam. If the spend