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' -· . RELATION OF LIBERTY LOAN TO THE WAR SAVINGS PLAN. Stc.teu:ent by John S. Drun;, State Director of War Savings for California (Northern) before Liberty Loan conference in San Francisco on January 16~ 1918. *************** In calling for public subscrip-tions to Governrr.ent secur;;t.l,As issued in aid of the war~ the Treasury DepartiLent has not definitt:Jly es:;a.b · lished the relation which exists between the two types of secu.ri t:i.es. but has prou.ulgated plans which conteiLplate that during at least a part of the yea." both types will be on sc.le at the sa.zr.e tirre. The very nature of the situation precludes any idea of eorr.petit·ion between the Liberty Loan coua~ttees and the War Savings conn~ttees. At the sane tiue it is advisable to analyze carefully the relationship between the two campaigns 1 which I shall atte~pt to do under the headings of (a) objects) (b) nethods, and (c) results. l. OBJECTS: Of course 1 the prirrary 9bject of the Liberty Loan Cam- paign is to obtain vast credits needed by the Government for the prosecu.tion of the war. Credits in the amounts necessary can only be obtained through the large subscriptions to Gove~ent loans by/great financial~ co~rcial~ and . induslrial interests oi the country acting together# and utilizing the resources of the Federal Reserve Ban~ing System. It is barely conceivable trat the war rrd.ght be Unanced entirely in this rr.anner 1 but the results 1 to be cuss0d later~ point of view. ,.,. (li::;- would not l;le satisfactory from either an economic or a polit5.cal X-595 The secondary object of the Liberty Lo<l-n C.::.n.p.:.ign is to stirr.ulate the patric..tism of tho people· by of the country to a~~pealing to oVeryone to invest in thJ future the extent of his ability 1 and at the sarr.e tic.e :re1:.ev0 tho pressure upon the financial, corr..rr.ercial 1 and industric:.l int0rests v.rhich ~ust in any event subscribe tho bulk of the loan. The prin.a.ry object of the War Saving Pl;:...n, on the other. hs.!1d 1 i:3 not to obtain credits for the Governu:ent 1 but to stirrclats patriotism by rr~king it possible for everyone to have a direct fin~ncial interost in the outcoue of the war. E~ually important is the object of educatine all of the . by . people to save on nonessentials and/reducing their spending, to release labor and rraterials needed by the Governrr.ent for war purposes. to encourage the pra~tice A third object is of thrift and saving, to the end that these corr.e a national habit and lay the foundation for our aconorr~c ~ay be- security after the war .. Finally 1 there is th0 practical object of raising $2,000~000,000, for war purposes 1 not one cent of which contributes to an increase in thG tre~endous inflation which results frolli the flotatimn of a credit loan as distinguished from a strictly thrift loan. To sun.rnarize the objects, then, we find that on the finz..ncial side, the. war could go on for a time at least without the War Sa~sPlan; but on the political side, it is the policy of the Governaent to atterrpt by every u.eans possible to obtain the financial help of all of its citizens; and on the economic side, it rray be stated as axion:atic that our war financing will be sound exactly in proportion as we accomplish it without undue inflation. X-695 •. 3 - 2. METHODS: Tho rr.ethod of the Liberty Loan C..n.p::t.ig!'l is a sp.Jct.acular drive; the rwthod of the. War SavingsC.::..n.paign is a broad educational rr,oven.ent involving n:inute organizc:..tion reaching into every horr.e 1 however Liberty Loan C.::.r:.paign is directed ospcei:-..111 to of the War Sa.viDg~ ili:.:.9W~ Ca:.:r.paign is directed especially to The one is designed) az I have saic. 1 to raise ~re1its Ti1e pooJ.·. subsc::-:i.bJa.; the effort ~·bU.!!. _oj_ n:Y.b:3C£.~.b.Q...:§... regarci.less o!. ~r? r:a.un13r; the other is desig'!'led to bring !1or...c to ovary rr.an, wca:an.,and chili enjcy:•.r.g the benefits of American lifo a raalization of the obligations of cHiz.mship and how each rr.ay help through saving,~ even in the sn:allest arr.ounts. This is not to say that there is no over1.apping 1 for the Liberty Loan Cau.:pa.ign is largely an appeal to patriotism. rr.ado for the purchase of both types o: securities. sarr.o uses. large The fl;;.n;e <tan be The money goos to the The only difference is that Liberty Bor..ds a~ounts an~ arg):l~mtu rr~y be subscribod in on a credit basis 1 while War Savings Certificates c~n be purchased in air.ounts not .exceeding $1000 for any purchaser 1 and they can not be used as collateral. To surrnarize liothods~ then, the Liberty Loan C~rr~aign is pric.ari:y a drive for subscriptions.; tho War Savings C;;..rr.paign is priz.:ariJ.y an educational catr.paign to teach the po ople @!. evc~7one ::rnst h.}lp finance the wr-.r J as a concrete patriotic dut-y, by rci:ra:ir.ins f:rorr. wasteful and noedJ.ess spcni.Jng and loaning the rr.oney saved to tho Go7.~ernu.e:J.t. 3. RESULTS: The over-shadowing result of the Libert}- Loan CaL~pa!.gn is the irrn.odiate creation of ample crodits with which to carry on t!le war. .. This result brings with it, however, the inevitable inflation of credits, . ' X-695 •. 4 - which r3acts upon our whole econorric life and contributes largely to the increase in prices. Inflation is a necos:;;ary evil; the offort of th.:J Treas- ury De;parttnent is to :teduee it. to a ninin:w:n. Hence the c:arr.paign tb obtain srr.a.ll subscriptiona,either (a) frau; existing wealth, such as rr.or.ey on deposit in savings banks, which is already represanted by funded invost~ents which are placed in jeopardy by the withdrawal of deposits~ or (b) on instaJ.lmont contracts involving trorr.endous detail labor for the banks and e~ployers who advance the money and carry the subscribers during the period of their paywents. ' It can not be overlooked that thousands of subscribers to Liberty Bonds, on whom the Liberty Loan Conn;i:~tees expend tirr.e and energy dudng the carr.pa.1gns 1 do not retain the bonds they buy but 11 spend 11 them exactly as cur- rency_. in the satisfaction of personal wants vvhich i t has not been the effort of the Liberty Bond Campaigns to curtail. It is obvious that whenever a subscriber pa.rts with his bond., except for reasons .of nGcessi ty 1 the w:vrk of the .. ~iberty, Loan Campaign is to that extent ~ndone. The bonds that find their way back into the rr-.arket n:ust be abso1·bed, and in practice arc absorbed> by the financial, corr.merc5al and industrial interests which were intended to be reliev(tci by the original wide placerr.ent or distribution. Moreover it is plain that the subscriber whose bond does not "stay put" iS 4oing absolutely nothing to help the Governrr.ent, for when he "spends" his pond, he is competing with the Governuemt which his subscription was sup- posed to help. th~ ~oney If I do without a suit oi clothes wnich 1 do not need and put I saved into a Liberty Bond~ I ~ giving the Governnent the first X-695 - 5 - call.upon the wool on the sheep's back and all of the productive factors But if I later trade the bond for the tween the wool and rre. undone all the good arising fro~ suit 1 I have the first transaction. The War Savings plan is designed to encourage investing A War Savings Certificate is not negotiableJ but as an deerr.able at any titr.e without ioss to the invesiob the vita1 5-tr.pbrtanee of 1ndlvi~ua11s derrartds Saving be~ offset~ and hol~ing. it is rrade ro- The campaign will empha~:tize ·to ir.rltest;, pritr.ai"i1y 'because saving tedur.es the upon the 1irrited supply of labor and rraterials available for war purposes 6 and secondarily because the thrift wealth or savings of the people Will be our chief ~en security after the war. econo~ic per cent of the people bought Liberty favorable conditions for securing wide distribution. Bonds~ under the ~ost At least thirty per cent are ex,pecte4 to invest in War Savings Stan:,ps during the corning year. Just as the Liberty Loan Caxr.paign is far n.ore in:.portant financially 1 it is far less important politically, where the rrain consideration is nUffibers rather than aiLounts. . To sunnarize results 1 then 1 the Liberty Loan Campaign produces money, but it been reached, Loan C~paigns On the ~st be recognized that only ten per cent of the people have On the economic side, it nust be recognized that Liberty rrake for inflation, whereas the War Savings Campaign does not. poli~ical s~d~, reaches three tirres the War Savings Campaign will be a failure unless it a$ ~ny people as have been reached by the Liberty Loan Corw.i ttees .. ~he . ,. X-69!;) .. 6 ... •' '1' • It would seen. that both one dove-tailing into the other, can~paigns have art in;portant part to play, Briefly statedJ the object ot the Gvvern~ n.ent is to finance the war pron.ptly; with a rrJ.n.in:un; of inflatib:b. and a rr.axi• nun. of subscriptions. The Liberty Bond Campaign is addressed prirr.arily to obtaining the necessary creditsA regardless of financial system. conse~uences entailed to ~~r The primary object of the War Savings Can;paign is to secure the greatest po&sible number uf srr.all individual invest~ents .. representing thrift wealth.solely, and without inflation. Our appeal to patriotism is the san.e. The investor in one type of security is helping exactly the sane as the investor of a similar amount in the other type of security. Experience of the first two Liberty Loans r~s shown that what is needed r:r.ost ia propaganda addressed directly to the individual, nQt for a brief period but as a part of every day routine. This is the object of the Wat Savings Can~aign. It is a propaganda of patriotisr:r.., and in order that it rray be effective_. the Governrr.ent has oUered special inducen.ents to the people to save and invest srrall an;ounts, in order to keep the evils of inflation at a rr.inin:um and to awaken the patriotlc interest of the whole public. If the War Savings Campaign is successful, the n;oven.ent will be the n;ost active feeder for successive Liberty Loan Drives. If we can irr.press upon the people the vital necessity of saving, larger affiOttnts will be available for subscriptions to future Liberty Loans~ • and withOQt inflation. .... 7 - We hope to educate the public to an understanding of why should not be sold~ through the e~phasis Govern~nt securities we shall place upon the reasons why no one should redeeffi his War Savings Certificates except as a rratter of extrerre necessity. On the other hand~ the Liberty Loan Campaign will be an e!fective rr.eans ~ throush its publicity and adve rtising 1 of bringing home to tile people the irr.portance vf everyone doing his part., whether his ability is Ir.ea.su.red by a. Liberty Loan subsc~iptiun cf fifty thvusand dullars or the purchase of a. single War Savings Certificate Strucp. (Signed) JOEN S. DRUM. 2/2/18
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