The Wilmington morning star. [volume] (Wilmington, N.C.) 1909-1990, 1945-04-07
BABS0N EXPLAINS
POSTWAR INTEREST
BY ROGER BABsON

BABSON PARK, Mass, April o.
Interest rates are like the weather.
AS few people can work up much
hvsteria over isobars, gradients
and cycles; so only a few watch the
statistics determining money rates.
To those outside the ranks OF pro-
fessionals the forecation tech
nioue is a yawn. All you want from
the weather man is notice when to
get ready for heat wave or
blizzard or a hurricane! Most read
ers want to know only whether
securities are to 60 up or down.
Yet interest rates, by definition.
reflect the price of credit. Dull
and theoretical as they sound, cred
il conditions may shape your whole
tomorrow.
I expect that the board trend OF
interest rates, in the postwar pc
riod. will be upward. Whatever this
NAV mean to some unfortunate
railroad bondholders, the owners OF
ten-year war bonds need not lose
moments sleep. The buyers OF
savings bonds, Series E, F, & G"
enioy unique protection. Their cap
ital is safeguarded by the resources
of an allrowerful nation, and a
special covenant. Such war bonds
do not suffer the vabarles OF the
market place. The government IN
effect has pledged that the prices
of these bonds will remain practi-
cally pegged regardless OF rowing
interest rates.
True. some landmine of initiation
MIGHT shatter the dollar itself. To
raise that specter, however, is Like
worrying about which room is SAT-
est if your house should take a
direct hit from blockbuster. SUI
flee to say that whatever befalls-
except a social or economic revo-
luton - your tsnyear war bonds
are as secure as any obligation
on earth and far safer than most.
In purchasing these bonds you.
moreover. contribute to national
welfare. Let us hope that the num-
Der of holders of these bonds will
approximate 1873 million, or the
population of the U. S. With this
general statement regarding these
Savings Bonds (and I am not COM
menting one way or the other as
to the long term "Governments").
let me return TO my discussion OF
future interest rates.
Calvin Coolidge had Vermont
er's gift for plain talk. Everybody
who Gin Coolidge language) hires
money is concerned with the
price-tag on credit. Firming rates
will add their quota to the cost
of doing business. Thence the i'm
pact will spread to cost OF living,
to funds available for wages, to in
vestment lists. Holders of non-con-
vsrtible issues may feel the change
directly. All groups, however, in
GLIDING housewives and school pu-
pills, viii share to some degrees
in the economic currents stirred by
changing interest rates.
Some analtsts contend that the
government, via the Federal Re-
serve System, can hold down post
war interest rates. In theory, po-
tential credit can be expanded
through lowering member bank re-
serve requirements and the legal
reserve minimum. These very tao
tics, however, might incit flight
of funds out of highgrade bonds
into other assets. Moreover, after
the war, governmental appeals to
patriotism will lose some of their
wartime pulling power. Sooner or
later the job of supplying longterln
funds for capital purposes will, I
think, be removed from the Fed
eral Reserve System.
The government can for awhile
balance, uon its chin, a juggler's
pole of credit,-as long as no gusts
arise to upset the delicate poise.