Imperial Valley press., 1939-06-30
Bobson Declares
NeWLoun Scheme
Bad For Business

lIlB lOT Jiiilc odlCS oCIlcIIicS. AL OiiC
boomlet of 1867, instalment sell
ling went on o rampage from which
it has not yet returned.
Instalment selling has spread into
many other fields. Look at your
current mail order catalogue. and
see how some concerns are mer-
chandizing soft" goods on an easy
payment basis. You can buy any,
thing today-even shirts, socks and
underwear-on time payments If
your total order amounts to $40
Instalment selling has made 1t more
difficult than ever to forecast busi-
ness conditions. Ten years ago II
you knew tie value of inventories
unsold and the amount of bank
loans outstanding. you had a good
idea as to the trend of future busi-
ness. Today, the amount of money
owed on instalment contracts is
also a tremendous factor.
Debt Reduction Discouraged
Not only has little been done to
help reduce debt. but the recent tax
laws have discouraged business men
in doing So For instance. if a
small and financially weak concern
could buy UP its notes as SUBJ
stantial discount the discount
would have to be reported at the
end of the year and be taxed at II
to 16 per cent. Meanwhile, Big
Business concerns, whose bonds and
notes have been selling at par or
better, have been calling their
bonds and refinancing their debt.
They have thus been able to take
advantage Of the lowest interest
rates in history and have cut their
fixed charges drastically. The small
business man has been unable to
do this.
The latest idea In Washington
is to encourage debt reduction. 1t
will permit financially weak con-
Germs to buy in their interest bear
ing obligations at less than par
without mourning a tax liability
AS far as helping out the smaller
business man from a credit stand
point. this is the first forward step
that Congress has taken in long
time. The Undistributed Profits
Tax was also handicap to busi-
ness concerns, big and small. who
wanted to cut their debts. This
tax is being completely abolished
in the new business relief" tax
measure now going through Con-
gress.
The BILL which wipes out the
tax liability incurred by a COM
pany buyina in it's own obligations
below par is constructive step. It
can become definite aid to exc
cutiveS, workers. and investors o,
weak business concerns. This new
program should help to strengthen
many second-grade bond and note
issues. In fact. with high grade
corporation bonds selling at ali
time highs, many business and pro-
fessional men, who can afford to
take a little extra risk. may be
wiser in buying some of the better
second grade issues.
Debt No Longer Disgrace
AS l write this column at my
birthplace by the sea, I am forcibly
reminded of the great change thai
has taken place since the Worlo
War in peoples attitude toward
debt. Only twenty-five years ago
debt, like smallpox. was something
to avoid. Banks. schools and par
entS encouraged savings. The goal
OF all was a bank account-even
though it started at only one dol
lar.
Today, l find an entire change
of sentiment here in the old city.
Banks, schools and parents no
longer encourage deposits. Debt Is
no longer summed. Despite this
change in attitude, I cannot be-
lieve that debt is any less dan
gerous today than it ever was. Yet,
even In the face of this situation.
I am optimistic on business for
the near future. In fact June in
dustrial activity was considerably
better than May Moreover. July
should be as good business month
as June. However, the changed
attitude as to thrift and debt, If
continued, makes me very fearful
that we are heading into a terrible
smash some6ay!