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THE IMPORTANCE OF SAVING

Remarks of A, L. Mills, J r . , Member, Board of Governors of the
Federal Reserve System, before a joint meeting of the Chambers
of Commerce of Eugene and Springfield, Oregon, held at Eugene
on Friday, November 1, 1957

Throughout all of the world-wide turmoil that our generation
has experienced, nothing has happened to change the meaning of that
time honored saying, "Saving is a virtue."

In fact, the virtue of

saving grows each day, both in its moral and material sense.

This

is so because saving is the foundation on which our national wellbeing and prosperity rest.

For example, without the benefit of

saving, the United States could not securely maintain its position
of leadership among the free nations of the world, who must stand
together as a bulwark against a threatening alien social and political
philosophy that is backed by armed might.
Obviously, there must be financial support for the tremendous responsibilities that have been thrust upon our national
government at home and abroad by a relentless march of events*
Saving is the best form of financial backing that can be given to
the performance of our national and international duties because it
is an economic function essential to maintaining sound business conditions.

Investment in United States savings bonds is a preferred

form for saving to take as it is a means through which the investor
can enjoy the material satisfaction of an adequate interest return
on his investment along with the moral satisfaction of sharing in a
vital, patriotic endeavor.

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Unquestionably, helping to finance our national government's programs at home and abroad deserves the same kind of patriotic
public response that was forthcoming to finance our earlier direct
war efforts because, at bottom, our national security and well-being
are still at stake,

Moreover, with respect to the business side of

our international relationships, i t is clear that the advantages
accruing to the United States as a great trading nation have grown
proportionately to the breadth and reach of our world-wide alliances.
Inasmuch as foreign trade is a factor that is vital to our general
prosperity, investors in United States savings bonds act in their own
self-interest by fostering the conditions under which our foreign
trade can flourish.
Dut, important as good international relations and an
active foreign trade have become to our national security and general prosperity, they cannot exist unaided and except as they are
nourished by a strong domestic economy.

It is in this area that

saving is of greatest significance, both in its moral and material
aspects.
On the moral side, saving motivated by patriotism is always
a virtue to be cultivated.

On the material side, saving is something

that individually brings pecuniary rewards and collectively affords
economic protection to the preservation of those rewardsf

For this

last reason, savings have been put in the front rank of the forces

that are essential to maintaining sound business conditions at home.
The reason for this is that as savings must first be accumulated before they can be put to use, their expansionary effect on the course
of business at a time of exceptionally high business activity — when
moderation should be the proper watchword — is less than that of bank
created credit.
As you know, in these last few years when inflationary factors
threatened to undermine the soundness of our national prosperity, it has
been an objective of national economic policy to discourage the overexpansion of credit

and to encourage the use of savings in ways that,

in combination, vail foster economic stability and forestall the
occurrence of the kind of conditions that tend to interrupt and check
the even progress of economic growth.

Moreover, in view of the central

position that the Federal government holds in all of our national economic affairs, it is essential that its requirements be financed as far
as possible from savings•
It follows logically that when the Federal government is
financed to the maximum extent possible from savings, the public
interest is served best at the same time that the personal interest
of investors in United States savings bonds is advanced, both in a
moral and material sense.

Moral, in the sense that such investment,

by helping to foster business stability, assists the government to
shoulder confidently and capably its world-wide responsibilities.

And, material, in the sense that such investments are a brake against
the growth in the kind of spending in all walks of public and private
life that causes prices to rise, the cost of living to increase, and
ultimately makes saving more difficult and less fruitful.

VJhen, in

addition, account is taken of the fact that the interest paid on
United States savings bonds is in line with the high quality and redeemable features of the security offered, there is assuredly every
material incentive for making this form of investment.
However, it is not enough to urge the use of savings as the
most desirable basic means of financing the Federal government's operations,

I t is just as necessary that the same principle be applied to

other types of public and private financing whose requirements, of
course, exceed that

of the Federal government.

This is not to say

that a wide use of credit is not an essential ingredient in economic
grov/th, but that there should be a proper financing balance between
the use of savings and credit, with the weight tipped to the side of
savings at a time like the present when a vast amount of credit is
already in use.

I t is in the light of this reasoning, that Federal

Reserve System policy has been on the side of restraining the expansion of credit.

It is for comparable reasons that the Federal

government has acted to reduce governmental expenditures wherever
possible.

If we are prepared to accept the thesis that the United
States is pretty much what we make of it by our moral attitudes and
our business actions, a bright future lies ahead provided we make
the best of the present.

One way to do so is through the purchase

of United States savings bonds.

The moral and material rewards to

be gained by investing in America are very great indeed.