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y A TALK BY EES2S? G. DPAPER EE FORE THE ' SAYINGS BCIiCS CGETFEEENCE DICKER v Federal Reservo Building, September 13, 19^6 pcQtr- ^ i ' ? ^ Speaking on behalf of our Board, we want you to to cm hew pleased we arc to have you hero vdth us tonight. The Federal Reserve, consisting of both cur Board of Governors end the Federal Reservo Banks, has always believed wholeheartedly in the objectives which you aro seeking. In fact, prior to the issuance of the first Series E bend on Kay 1. 1 9 W , the Board sndo available to its own employees the first voluntary payroll deduction plan evor established by a Government agency. This was in furtherance of the objective announced by the Treasury that the Government desired to utilise the savings of individuals, particularly those of moderate savers, in financing the Gevemmerit1 s requirements. So you see that, when we meet together tonight, it is a meeting ef old friends, all of whom believe in the same worthy objective. The task facing you n o / is rather different from the one that you performed =o successfully during the war. I t is border in many ways, but alrr,03t as important. During the war, tho advantages ef saving wcro obvious to most people. be • Civilian goods of all kinds were scareo, and supplies could not increased without reducing c^r military strength. come* wore high. At the same time in- The Government needed money to fight tho war and, in or- der to reduce inflationary pressures, wanted to draw as much ef it as possible from L a l X savers. XERO COPY During wartime, most.people saw the purchase ef - 2 - E bonds as an opportunity to servo thcdr country while at the same tine building for themselves a reserve for meeting-the risks of old age, sickness, and economic insecurity, as tvell as the needs of futuro personal advancement and family welfare. How all of these reasons for buying bonds still exist, but they seem a little less apparent than they wore last year or the year before* Most of you are probably familiar with the study of liquid assets that the Bureau of Agricultural Economics conducted for the Board of Governors this spring. On the basis of over 3,000 interviews throughout the country, this survey yields some interesting conclusions about the motivos and futuro plans of savers. » .1 One striking fact that emerges from these interviews is that 73 per cent of the holders of United States Saving Bends did not plan to use any of thorn in 19h6 to buy consumer goods, except in emergencies. This suggests that your Savings bond campaign to encourage the continued purchase and holding of bonds should find a receptive market. On the other hand, the fact that people wore planning to draw dora their liquid assets, including savings bonds, by 5 to 7 billion dollars in order to bay durable goods, including housing, is by no means negligible in relation to the supply of these goods - oven though it represents a small fraction of total liquid asset holdings. The exports who made the survey concluded that "although the prospective buyers were a minority of the spending units, they constituted a substantial number of people, and might crcate a demand for houses and consumer durable goods that would excocd the supply available during 19^6." A like situation exists -with regard to competing forita of investment. Of people holding more than -51,000 of liquid assets at tho beginning of 19^6, only 6 per cent definitely planned to put somo of them into real estate or non-Government securities. were considering such a transfer. Another 7 per cent Eut in view of existing pressures in the real estate and security markets, tho amounts involved aro substantial — about 5 billion dollars. It is thus in tho nation's interest, as well as in the interest of tho avorago family, that savings and investment in savings bonds should continue at a high rate. Disbursement of wartime savings new would add to inflationary pressures.' Later on, ths same savings may holp to sustain purchasing power and prevent depression. This brings me back to my earlier point. All tho reasons for saving that existed during tho war still exist, yet bond purchases have fallen off. Incomes are still high. " " Curable goods generally and oven ' many non-durable goods are still scarco. VBocause of the acute inflationary ' conditions that exist, there continues to be an opportunity for people to serve their country by refraining from purchasing nonessential items or investing in other securities and real estate. Tho Government still needs money and still wants to obtain it from small savers. The need for pro- tection against sickness, old ago, and unemployment and for providing for future personal and family welfare is as great as over. There is an obvious contradiction in the present savings situation. Over half of those interviewed early in 19^6 said that saving was more important now than during tho war; only 6 per cent believed it vras less inportant. At the sane time 27 per cent of those families were actually paving less at the bo ginning of I9I46 than they were a year earlier, while only 15 per cent wore savins more. Most people seem to recognise the impor- tance of maintaining and increasing their holdings of savings bonds during this transitional period. S t i l l , the facts show that under present infla- tionary conditions savings are declining. This contradiction between intentions and action constitutes your task and your opportunity. There is a disposition on the part of many to believe that savings are contributed mainly by the rich. Our nationwide survey of savings shows that nearly half of the people's savings was contributed by consumers with incomes of $1,000 to $4,000 and that this group includes almost two-thirds of all income receivers. There is clearly a broad market available for the sale of small as well as of larger denomination savings bonds. The knowledge that this is so justifies every confidence that your Savings Bond Program w i l l be a gratifying success. 'XERO i copy !
@FedFRASER