Evening star., 1940-08-16
Bank Credit|sHe|d
Certain 10 Broaden
To Fabulous Levels
o But No Hint Is Seen of
Any Difficulty With
Government Financing
BY GEORGE I. HUGHES,
Consolidated News Feature Writer.


NEW YORK, Aug. l6.-The in
crease in outstanding bank credit
to a record high revealed in this
weeks statement OF the reporting
member banks is explained as due
to subscriptions to the commodity
credit note offering. Life insurance
companies also increased their hold
ings of Government obligations in
the same period and doubtless the
same explanation applies.
The inference. however. that this
is exceptional and therefore not sig
nificant is not warranted. Defense
financing has not even begun and
both the banks and the insurance
companies will be called upon to
take huge additional blocks Of Gov
ernmentS before We are through, and
unless there is a corresponding de-
crease in loans. which is improba BILE
in the highest degree. outstanding
bank credit is sure to swell to un-
heard of levels. Likewise the inSur-
ance companies and all other finan-
cial institutions will have to take
more and more Government securi-
ties of ore kind or another.
No Indication of Difficulty.
Fortunately, so far at least. there
is no indication that the financing
will not be accomplished without a
semblance of difficulty. There has
been slight easing of Government
bonds, but on negligible volume and
in no way suggesting a trend. No
long-term United States bond yields
as much as "a per cent at the mar
ket According to the index kept
by the Federal Reserve Board the
average yield on four Treasury issues
with maturities of II years and
over is only 224 per cent.
AS for Treasury bills they 60 at
the same ridiculous prices The lat
est issue gives an average yield OF
0007 per cent. At that the total
amount applied for was so per cent
higher than the amount accepted
To date then, despite the record
breaking national debt and the GER
tainty that 1t will be higher. very
much higher before it is lower, the
interest cost to the Government is
as low as ever
1t is interesting to note in this
connection that Berlin has a money
surplus problem although its origin
is different from ours. The ex-
PLANTATION there for the eXtraor-
dinary ease is the shortage of con-
sumner goods which makes spending
impossible and so contributes to an
accumulate of savings. That situ-
alton is likely to last Indefinitely. On
the other hand German bank de-
positS are not growing at the re-
cent rate, partly because of larger
investment of private funds in Reich
treasury notes.
Surplus of Consumer Goods.
Here on this side there is an
embarrassing surplus of consumer
goods. Demand deposits dropped
in this weeks report, but there is
no reason to believe that it is rea,
turn in the tide which has carried
that sum up over three billion dol
lars in II months. All these diff
ferences of background admitted
it is curious commentary on worlC
economics that both the United
States and Germany should ex-
perience unprecedented ease il
money rates when both are spending
at ecord-breaking rates, one tt
wage war already in progress ano
the other to prepare for a war which
may not come All the classic con-
ditions for imitation are provided, but
the imitation is held in check.
The only medium which has
proved successful in public distribu-
tion of the evidences of our owr
debt has been the United State.
savings bonds sold at a discount ano
non-negotiable That venture has
received universal appreciation which
is all the more remarkable because
OF general unfamiliarity with the
discount feature. The question now
arises Of how long the offering will
continue at the same price and or
the same terms. InaSmuch as all
these savings bonds are payable on
demand after 60 days from the date
OF purchase a large contingent Of
current liability has been created
The risk, if any, however, is one that
the Treasury can well afford to take
in consideration of the advantages.