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Next Liberty Loan Must Yield Higher Return to Investors, Is Bankers' View
Majority Believe That With People Facing Heavy Tax Payments, Indus? trial Situation Unsettled by Fuel Crisis, Outstanding Issues Selling Below Par and Way Not Cleared for Small Investors to Take Up Further Burdens, Government Will Either Have to Pay More for Funds or Sell Bonds at Discount to Insure Widest Possible Distribution By William Justus Boies NO QUESTION considered b American financiera sine tile world war began ha been more difficult to answer tha what is the proper interest rate t be named by the government for th next Liberty Loan. The Treasury i confronted by the fact that its 4 pe cent bonds, put out last October, ar selling virtually at a 4% per cen basis; that the forthcoming loai must be much larger than either o the others, since the government i under the necessity of raising fron eight to ten billions by Jun 30 next, and that a decision to ad vanee the interest rate to 4M or 4M per cent would automatically put uj the interest rate on the lirst aiK second Liberty loans, thereby add ing largely to the cost of financinj the war. It is recognized also tha such action would influence all fut ure borrowings for war purposes am cause a readjustment in securit: price?. The situation, therefore, is utterly unprecedented and of interest t< every borrower in the United States since any rise in the interest rate or United States securities has direct bearing upon the cost of similar ac commodation to private corporations and individuals. If the govemmenl has to pay, say, 4 te per cent for z loan offered in March as against 4 per cent for a loan marketed five months before, it means, other things being equal, that the cost of all lend? ing operations has materially in? creased. Bankers Asked For Suggestions The Secretary of the Treasury, be? ing deeply interested in financing the war outlays with 4 per cent loans, if possible, lately let it be known that he would welcome suggestions from bankers of the large reserve centres concerning the best way of handling the next loan. Some very interesting letters have been sent to Mr. McAdoo, the desire of bankers everywhere being to keep the interest rate on government loans as low -s. possible, so as not to further increase the cost of doing business, which would in? evitably follow it* the charge for mercantile accommodation should be raised following an advance in the interest rate on war borrowings. Appreciating the necessity of retain? ing the 4 per cent interest rate, if possible, Secretary McAdoo, in his annual report, says flatly that it may be better for the people to in? crease taxes than to raise the inter? est rate on government loans. He puts it bluntly: If a situation should develop where the government could not sell con? vertible and partly tax-exempt bonds upon a 4 per cent basis, it would, I believe, become necessary to serious? ly consider further revenue legisla? tion. In my judgment, an increase in the rate of interest en such bonds would be extremely unwise and hurt? ful. The higher the rate on govern? ment bonds, the greater the cost to the AmeVican people of carrying on the war and the greater will be the depreciation in all other forms of in? vestment securities. We cannot re? gard without concern, serious de? clines in the general value of fixed investments. It should be the ear? nest endeavor of every one to prevent this, and I earnestly hope that the processes of education and of unsel? fish consideration of the problem from the standpoint of general inter? est will provide the necessary remedy." Much Opposition to |\ Short Term Loan V This means that the third Liberty Loan to be announced soon will carry 4 per cent interest, if it is possible to offer inducements suffi? cient to make investors bid par for a bond carrying that rate. Patriot? ism is always an important factor in the successful sale of war loans, but the two and one-half billions in taxes which the people must pay over to the government by June 15, together with the burden of in? creased living expenses, make it necessary for the average investor to secure as large a return from his securities as it is possible to ob? tain. Various expedients have been suggested to the Treasury for meet? ing the situation, a novel proposal, being for the issuance of a bond carrying an indeterminate rate of interest, so as to protect the mar? ket for other securities. This would lead to confusion, however, and per? haps imperil the success of the great loan. Other bankers believe that the goverment, by issuing a live-year ? loan, could obtain what money it needs at 4 per cent, since there is always a broad market for a high ! grade security having only a few years to run. This method of finan- I cing is opposed, however, by many I a?v being unsuited to the needs of %. - government which could scarcely afford to provide for the require? ments of a short war at a time .vhen high military critics have been arging thoughtful men to reckon on i long drawn out conflict. Rich Men Favor Tax Exempt Bonds Other bankers contend that the government would do well to return to a tax-exempt bond as the secu? rity best adapted to attract invest uent support under such conditions as now prevail. The plea is made :hat with the heavy increase in in? come taxation it would be easy for :he government to sell a few billions 3f tax-exempt bonds carrying a 4 per cent interest rate. An interior banker, known as a nigh authority on investment condi? tions, who has served prominently on Liberty Loan committees, ob? jected to this expedient as imprac? ticable, adding: "You could not place a five billion loan or an eight billion loan this way. Rich men would make large purchases, but their combined support would be in? adequate, in my judgment, to insure the success of a great 4 per cent loan. I think that the government should face conditions as they are and raise its bid for capital to a figure where the inducements would compel investments on a tremen? dous scale. "The fact that the government has the highest credit of any bor? rower in the land is no reason why it should expect to stay on a 4 per cent basis in a 6 per cent money market. The success of the next loan should not be threatened by offering an income return out of conformity with the changed condi? tions which borrowers now face. Would it not be foolish for the gov? ernment to attempt to swing an im? mense 4 per cent loan at par when the old 4s are quoted nearly 4 points below that level? "Patriotism is all right, but the buying power of any community has to be appealed to effectively when an attempt is made to offer about the largest loan that the world has ever seen. I believe that conditions call for a 4 V> per cent issue, in or? der to make the bonds go like hot cakes.' In considering the possibilities o? the next government loan offering, the activities of the proposed War Finance Corporation must be taker into account. This corporation among other things, is empowered to make loans to savings banks upon the security of the bonds held by them. Since the corporation is per? mitted to create and issue notes up to four billion dollars, which shall be available for rediscount by the | Federal Reserve banks, the question is whether the savings banks which 'have recourse to this great source I of supply may not be able to make I larger bond investments because of I this possible assistance. As it is, the savings banks managers have been fearful of tying up too much money in the new war loans. Should trie War Finance Corporation obtain le? gal existence immediately, however, the indications are that the savings banks would be able to fall back upon its facilities to an extent : which would enable them to make | larger purchases of government se ! curities in the future than they have in the past. It is worth noting, also, J that the proposed corporation has i the right to subscribe for and to | deal in government bonds. Views of Bankers Are Conflicting Some of the best known bankers 1 in the United States hold highly conflicting views, however, concern ! ing the best method for the govern? ment to pursue in getting its next great loan lodged with bona fide investors. James B. Forgan, chair? man of the board of the First Na ! tional Bank of Chicago, makes these i pertinent suggestions with reference ! to the next great loan: The first thing to think about with j reference to the third Liberty Loan ! is the absolute necessity of insuring its successful flotation, livery other i consideration must be subordinated to the one idea of marketing the bonds to good advantage. As to the j rate of interest, the current market I price for the former issues must be a prime factor. The government could hardly expect, to float a 4 per cent issue of bonds on exactly the same terms as the last when their market price has fallen to a 4'i or- a i Alii per cent basis. This would1 seem j to indicate that the rate would have ! to be 'l'o per cent, with other condi? tions the same as those of the last issue, except that it might be well to consider whether a five-year bond would not answer the purpose of the government at a time when it is necessary also to think of the effect of the new loan upon the marke" for other securities. 1 think that this possibility is worthy of serious thought. There is also the question of issu? ing an entirely tax-free bond. I think there is no doubt that a 4 per cent tax-free bond would sell quicker than n 4l? per cent bond that was subject to tho surtax. It may be, however, that the same reasons which caused the government to change Its policy in connection with the second Liberty Loan will have to be reck? oned with, and that there ?3 no in? tention of returning to the former policy of issuing tax-ex?mpt sccuri ? tics. William A. Law, president of the \ First National Bank of Philadel | phia and ex-president of the Ameri ? can Bankers' Association, does not want to see the government offer a I 41,? per cent bond. He puts it thus: 1 sincerely trust that the Treasury Department will not decide that the third Liberty Loan shall bear a high? er rate of interest than 4 per cent. Should a A\<? per cent bond be is? sued further disturbances in the se? curity market, would probably result. My preference would be to sec a 4 per cent bond issued at par, and I believe the people of the United States would absorb the issue. I also believe they would buy these bonds more readily if there were fewer technical differences in the various issues, which create discussion, waste time and effort and create misundcr : standing?. Government bonds are | bought from patriotic motives and not I as a matter of investment niceties. If necessary, I would rather see a 4 per cent bond sold at a discount than a 4',3 per cent bond sold at par. It seems most wise for the government to issue short-time certificates of in? debtedness for large amounts in an? ticipation of bond issues, and to make j this year one great issue rather than ! several small ones. j It seems better to continue selling the short-time certificates of in? debtedness through the banks rather than to investors direct, as the banks are vitally interested in seeing tax funds withdrawn during a long period rather than have a great concentra? tion of payments in June. Many banks have already advised their cus? tomers to invest in such certificates. ] We aro constantly buying them for account of the large taxpayers among our clients, in addition to buying them for ourselves. Opposes Selling Bonds at Discount John G. Lonsdale, president o: the National Bank of Commerce, it St. Louis, opposed any increase ii the interest rate: L I do not favor advancing the in? terest rate for the third Liberty t Loan to 41? per cent. I am aware that some concession must be made in order to enable these bonds to bo sold, but I believe this should be in the nature of tax exemption or that the securities should run only two to five years. I believe that steps can be taken that will prevent any marked decline in the market price of 4 per cent bonds after the campaign is over. I am in favor of selling short-time | securities direct to investors as well i as to banks. It is becoming more and I more difficult for private and cor? porate enterprises to sell their se? curities; in fact, the market foi ? long-time issues is practically closed Five-Y THE task of distributing the third Liberty Loan pre? sents extraordinary prob? lems which must, and of course will, be overcome. The first and second loans, involving long-term financing, and especially the sec? ond Liberty Loan, have not been digested; that is, the distribu? tion into the hands of invest? ors who hold by choice has not gone so far but that there is constant pressure of these bonds upon the market. The result is low,prices, which will act as a damper upon the enthusiasm of the general public in the purchase of any new issues. So long as these prices remain at their present low levels, the pinch of the loss, even though it be a book loss, will retard buying. Purchasers on the instal? ment plan are still in process of making their payments, and the way has not yet been cleared for the taking up of further burdens by these smaller purchasers, espe? cially with the cost of living con? stantly increasing. That portion of the population of the United States who must take the great bulk of a new government issue will, during the next few weeks, be making up their income tax re? turns, and will be faced with the necessity of setting aside a large amount of cash for payment of in? come and war excess profits taxes. Many will ask themselves if their enthusiasm in the purchase of Liberty bonds heretofore has not been overstimulated, and many who have purchased freely, and have, at the same time, spent free? ly, will be perplexed as to where the money is coming from to pay the tax upon their 1917 incomes. The heatless days, the shutting down of factories weekly, and the loss in wages adds to the prevail? ing depression. That the banks of the country must bear an increasing burden in government financing is obvious. That burden is to be represented in the bonds purchased for their own ar Loan the By C. E. Mitchell President National City Company account and in the loans made to customers secured by government obligations. This burden must be carried by banks in face of u full appreciation of the fact that they must continue to remain liquid. Banks must, however, look forward to the day when the burden shall be lightened. Is not, then, the problem partly solved if the securities to be issued by the government be of such short term in the present instance so that the banks may look forward to a time within a brief period of, say, five years, when they not only may, but must be, relieved of the burdens now to be assumed? Any depreciation in the price of short-term securities increases the interest yield with- such rapidity that it is inconceivable that five year bonds could go to any sub? stantial discount. A drop of one point in a five-year security in? creases the interest yield nearly one-quarter of .1 per cent, and two points nearly one-half of 1 per cent. This rapid increase of yield, a rapidity which is entirely due to the short term, will be the most potent factor in maintenance of prices that can possibly be found. Until such time as distribution of out? standing securities becomes so com? plete that digestion can be said to have taken place it is of the utmost importance that prices be held at levels which will not frighten the investing public. A five-year obligation does not, apparently, react to the benefit of holders of Liberty Loan 4s, but; in? asmuch as special legislation must in any event be necessary for short term securities, it would seem to be a simple matter to provide a special privilege to hold? ers of Liberty Loan Is to convert their present holdings directly into the short term issue. Such a privi? lege would forthwith advance the price of Liberty Loan 1 per cent bonds to parity or close thereto, and would improve the feelincr among present holders so that they olution would be more favorably inclined to the strong appeals which must be made for their further subscrip? tions. The question of rate is, of course, a vital one. Four per cent obviously does not attract invest? ment money to-day. The very fact that Liberty Loan 4s are selling on approximately a 4^4 per cent basis is conclusive evidence, not only that a 4 per cent rate does not attract, but that a 4 ],4 per cent rate does not attract. It would seem clear, then, in consideration of the volume of financing which must be done, that the rate must be made attractive, and the evi? dence is that that rate should be a 4Jj per cent rate. From these reasons the conclu? sion may be drawn that a five-year 4 Vs per cent bond would appeal to the public, and not only would be assured of success in its flota? tion, but would react upon existing Liberty loans so that sentiment relative to them would be improved to the point where less liquidation and a better market would unques? tionably occur. The suggestion has been made that a short term issue of this char? acter be made convertible at matu? rity into a long term 4 per cent issue. My own feeling is that after the close of the war and with finances approaching a more nor? mal condition the government will be able to refund any outstanding short term issues in large volume at at least a 4 per cent interest rate and possibly at a lower rate. If, however, the convertible feat? ure will popularize the issue it would seem desirable. The next issue of government bonds must be made a tremendous? success, and the degree of success to be attained depends in large measure upon the satisfactory solution of the problems of detail which are now under such constant consideration by the bankers of the country. to everything but government bonds. Funds for commercial purposes aro available from banks for oil "essen? tial" business because banks are conserving their resources for such financing. David R. Forgah, president of the National City Bank of Chicago, thinks that the government has a sufficient problem to solve in deter? mining a proper rate for the forth? coming loan. He says: I think the terms of the next Lib? erty Loan offer one of the hardest problems ever put up to financiers. The influences are so far-reaching that it is very difficult to decide just what is best. I do not favor ad? vancing the rate of interest to 4M? per cent, but would rather see it 4'4. I think that rate would be less detri? mental to general investments, and the bond at that rate would continue to sell at about par. I do not think the government should attempt to finance war out? lays through the sale of Treasury certificates running for a short period. I think such transactions should be confined to anticipation of the issue of Liberty Loan bonds as they are at present. I do not favor selling such short-timo securities direct to the investors when banks can take care of them. James A. Latta, vice-president of the Northwestern National Bank of Minneapolis, thinks that a slight ad? vance in interest rate may be neces sary in order to insure large over? subscriptions to a new loan: It would seem to mo that it would bo better to make a slight ; dvance in the Liberty Loan rate rather than to sell a 4 per cent bond at a dis? count. The prime essential is to have the issue liberally oversub? scribed. Other considerations would seem to mc to be of minor impor? tance compared to this. It would seem to me that the sale of Treasury certificates of indebted? ness should only be used as a lirai resort when bond issues cannot be sold on the right basis. I, of course, am not alluding to temporary cer? tificates taken by banks in anticipa? tion of bond sales. Short-time securities of the govern? ment only temporize with the situa? tion and when used should be taken by banks and financial institutions pending long-time financing to be taken by the public. So far as the Northwest is concerned, wc are in excellent shape. While money is in good demand there will be no diffi? culty in the centres taking proper care of all calls for legitimate pur? poses. E. L. Robinson, vice-president of the Eutaw Savings Bank of Balti? more, a banker high in the councils of the Savings Bank Section of the American Bankers' Association, thus summarizes the situation : Having floated the two previous loans at par and having agreed with the subscribers of both loans to ex? change their bonds for any later is? sues bearing a higher face rate in? terest, the government would commit an act of bad faith should it now is? sue a 4 per cent bond under par. A sale of its obligations at a discount would immediately discredit the bor? rowing capacity of the government and by the masses of the people | would be regarded as an evidence of I the weakening of their country's I credit. It should be the aim of our ] government to keep its investors i happy and satisfied, and such an act would alienate the good will of many small purchasers of past issues, i Either course would result in a read | justment of stock and bond values to ! some degree, although it is a question whether present prices have not al? ready in large measure discounted this readjustment. As an alternative < why not consider a tax free 4 per cent ; bond? Outstanding issues should, of ' course, receive exchange privilege. One sagiicious banker has said to me that, in his judgment, the entire war ! can be financed at 4 per cent if in? vestors receive assurance of perma? nent, tax exemption. I believe that the past high press? ure methods of floating Liberty ; Loan bonds, if persisted in, will keep 1 the whole financial fabric constantly agitated. But I am not prepared to say that the financing of war needs through frequent sales of Treasury certificates of indebtedness running a short period would have a tendency to give any greater market stability; in either event bank funds must be tied up in a very large measure. Charles A. Hinsch, president of the American Bankers' Association The Menace of 'Coolie Labor Proposal to Import Workers From Japan and China Fraught With Danger, Says Observer in Far East By Herbert Fitch Nara, Japan. THE QUESTION whether it is expedient to introduce Chi? nese or Japaneso labor in ! vast numbers into "white" countries. | "for the period of the war only," | seems now to be in vogue in many j parts of the world. In Australia no I agitation in favor of such a proceed? ing is likely to make great headway, for in that country they have long I since decided flatly that they will have nothing but a "white Aus? tralia," whether they ever succeed in getting a large population or not. There has been, it is true, some little talk of opening up the "Northern Territory," a tremendous undevel? oped tract, to Orientals, at the same time preventing them from crossing into the older and more settled por? tions. At present they are admitted to Australia only upon payment o? an almost prohibitive head tax. Yet many Canton Chinese have paid this I tax, have come in, and have captur?e most of the small produce busines; around Sydney, driving out whit< competitors. The chief arguments against ad mitting other than Western Euro I peans and Americans seems to h j that, once in, they will breed alarm i ingly, even to a greater degree thai ' has been experienced in countrie that have admitted southern am eastern Europeans in hordes. Ther ; is the additional grave danger o ! promiscuous miscegenation. Aus tralians, who have stubbornly main tained a slowly growing countr principally of British stock, ma perhaps be prone to magnify th dangers that might result from mi> ing of the various races. Thei again, perhaps they are entirel right. Rapid growth is not everj thing. There is a tree in Hawa I that takes root wherever the liml touch the ground?and they are a ways touching?but this tree is m j to be'eompared to the oak! To understand such a serioi ? question one must devote consider; ? ble study and thought to the ecoi ! cmic situation in the Far Eas rather than accept trustingly tl opinions of those who speak as "a rhorities." Japan Already Is Overcrowded The Chinese have a big countr even now quite sufficient in arab I lands to support the increasing po ! elation, if economic conditions the were not entirely chaotic. As it the Chinese have to struggle inc? santly. Occasional partial cr failures cause widespread sufferi and starvation. But in Japan the situation ? even more serious. I wish it mig ! be impressed upon the reader's mi ; how serious it is. Japan is airea overcrowded, and yet has each yc | an added population of around 75 1000 to take care of. These ? | poured out upon a limited ara area. Years ago, when England came somewhat overcrowded, trepid Englishmen spread over 1 earth, and founded colonies eve where. Other European nati< have done the same. What is Jai to do? Why, it is one of the m ' serious problems, next to the ?gr I war, that exist to-day; and yet \ \ pie will go on prattling as to w ? the Japanese ought or ought not ! do, never thinking that "neces? itas no law"?particularly in a co try where even the meaning of r suicide is unknown. The Japar are inevitably crowding; crowd each other, this way and that, like a theatre mob. Their lands, through intensive cultivation, have been made to yield their, utmost. The Japanese must overflow somewhere. Workers Do Not Fare So Badly In Japan there arc no really inde? pendent workers. The relations be? tween employer and employe do not greatly differ from those that exist ed in Europe and America in earliel days. The oijabun, or "parent party," is both employer and pro? tector; the kobun, or "child party," iii the employe and protege. The mutual feelings, I should think, might be like that of foster father and son. As a rule, the kobun does not fare badly. He is usually not overworked, and docs not need to ; hurry, for no one hurries in Japan. j The kobun is not, however, a poor ! "bound boy," like* the type vividly portrayed in English language nov eis of the nineteenth century. The relation is perhaps more in the na? ture of patron and satellite. I have often observed the woidcers hi the almost countless shops of great manufacturing cities like Osaka, Nagoya, Tokio and Kioto ; While my modern ideas of the essen? tial "equality" and dignity of "hand ? labor" can never permit me to look ; with equanimity upon any system j that does not grant equal opportu | nities to all to expand and improve | in this highly commercialized yel ? "democratic" world, still I believe the position of the kobun is rathei better in many ways than that oj many industrial workers in coun? tries where are presented greatei contrasts between the glowing sue cess of a few, and the glaring "un success" of others. To illustrate, ir Osaka (the "Pittsburgh of Japan,' as some extravagant person has mis called it) I walked miles upon miles day after day, through labrintb? o streets, and I could find nowheri such evidences of utter degradatio? and hopelessness as I have seen witl my own eyes in many smug commer cial cities throughout the whit world. I am not an "expert investi gator," so I walked daily, instead o being personally conducted in j motor by a government official an I "shown" everything, according to . i carefully outlined itinerary. S I there is something to be said i i favor of the oyabun and kobun sys tern that continues to exist almos i the same as in feudal days befor j Japan accepted the standard's c j Western civilization. j Disgraceful Episode 'Teaches Lesson One who cares to study the histor i of importation of Oriental labor i ' other countries does not have to <_> ! far. The defeat of the conservi [ tive party in England in 190G r> j iulted, to a great degree, throug j the strong feeling aroused amor | the more humanitarian and less con | mercial English people against t! results of the exploitation of Ch ! nese contract laborers in the Rar mines, South Africa. Sixty tho' sand coolies were herded in cor pounds without their women fol Conditions became intolerable. Ev< the reports of the consul on th question wore suppressed, b enough became known to conden the scheme for all time. Yet th question will always be rais? adroitly whenever imagined or re exigencies lead to a cry for "ehe, labor." Huma? nature has n changed very much?cither on th?? part of employers hungry for labor or on the part of really hungry laborers, who are sometimes led by glowing offers to sign themselves away. Of course, if the very exist? ence of any nation is pivoted upon the question of bringing indentured men in hordes to its chores, then by all means let the nation itself bring them in forthwith; but in the neme of "liberty and love of country" let no individual gain one cent thereby. The ?South African disgrace stands as a record for all time to make all men think whether they care to as? sume the dreadful responsibility that accompanies wholesale importation of men without families. I say that laborers of any race?herded and ci riven into strange lands, without the humanizing influences of their families to hold them in check?em? phatically do not, and cannot, mrtRe for ultimate human progression in the long run, whatever may be saic in extenuation on the grounds of "necessity." Too many deedb, I think, have been done through "ne? cessity." The Australians have doubtless pictured in their minds the revolting South African story, and will hav< lone of it in their isolated but for t?nate country. There is, I am aware, no point oi '?omparison between the Chinese oi ?ap??ese coolie, or unskilled laborer tnd the skilled workman. The con lition of the coolie is almost hope ess. But take sixty thousand o: ?ither kind from their beloved soil way from the influences of filia oiety, herd them in steerage quarters transport them to the uttermost end: of the earth, crowd them into com oounds or "quarters" under nativ oosses?arrogant in their petty au 'hority?all these under Caucasiai head masters who are just ignoran enough to consider the "yaller man, the "Chink" and the "Jap" as les than human?and such a situatio: will develop as will not be to th lasting credit of the promoters. Japanese Is a Family Man The Japanese is essentially a fan ily man. His average qualities art it appears to me, equal to those c any race living under like enviroi ment. Wherever he has been gran ed freedom to expand?as he ht under American influence in Hawai vith his beloved family growm around him every day?he has b '.omc an economic factor such as tl ?vorld must reckon with. To-day, ; Hawaii, there are estimated to 1 more than 100,000 Japanese, out < n total population of 250,000. ] 1.SG0 there were 67,000 Hawaiiai and only 2,786 foreigners of r ?aces. Out of a total in 1917 ? t6,695 plantation laborers 25,4' were Japanese, and there were but handful of Americans?only 73 The latter cannot compete. The 'wants" are double. Japanese birt n 1917 were 4,112; deaths on 1,246. American births were 28b ai ?leaths 141. The Japanese thrive, and if o .'orgets prejudice for a moment ?nay think that, after all, they ha a right to prosper, for they are qui as industrious, as frugal and Uudious ar; were the more neai white races when they had lit wealth and when men and worn worked like horses. Less efficie competitors have, it is true, dep ciated the "Japs," but the jealc criticism has not hindered their ? pansion in the least wherever th and the Fifth-Third National Bank of Cincinnati, says: If the government authorizes a ^t. able bond, I think the rate wonM necessarily be 4V? per cent, but T will prefer to 8ec a 4 per cent non. taxable bond issued. This won'd necessitate additional legislation jn order that the present 4 per cent tax? able bonds would be made non-tax? able. The issuance of a new 4 r,er cent non-taxable bond would not af. feet the prices of other securities as much as the issuance of a 41? per cent taxable bond. Clyde H. Folsom, government bend expert, believes that a higher inter? est rate than 4 per cent is called for My feeling has been for some time that it will be necessary to make the next issue a 4'/?? per cent boni unless it should be finally deci<hd to make the bonds tax-exempt, whijfc is not generally favored. While a 4 per cent taxable bond might be forced on the market, the country as a whole would not willingly par? ticipate in a loan of that character. It has been suggested that it seemed necessary to name a 4'-3 per contrate, the time to be limited to five years.' which might seem best., as the prior issues would not be convertible into an issue of this character. If I were to decide the matter, I believe I would issue a IV4 per cent, five-year taxable bond, as without' doubt conditions following the war would make it possible to- con? veniently redeem the loan within five years. have had the opportunity to build a fireside and a family. Picture these Eastern men, emptied into the mciting pots of strange lands and segi-egaied from the? ?.?herished home tics and all that they hold dear. What is going to happen? The opportunist can tell one, for his glib tongue works loosely for his purse, all the time. But no one else can. Hawaii has been a paradise for the Japanese. It is not difficult tc imagine what the racial composition of these fair islands will be within less than ten years. Plantation di? rectors want the Japanese, ar.d they are right, from their point of vi?>w, which is probably the old one that "labor is nothing but a comn-odHy." The Japanese arc so prolific that they have as yet had no time io con? sider the more advance theories of the dignity and the right:; of iabot, When a man is certain each .war to have one or two mere moalhs to feed he is not apt to consider deeply an; thing but the means to that end. Labor strikes in Japan have been rather a surprise, ind sometimes a joke. The government dees rot tol? erate any proceedings that look 'ike what it is pleased to consider social? ism. Even "dangerous '?noughts" have recently come under the ban, although it has not been revealed whether the X-ray or the third de? gree was employed to uncover them. Strong Japanese '?a'nor unions nay accomplish something some day, but it is sure to be a long struggle. Harsh Measures Not Effective Industrial employers who favof admission of hordes o: Orienta' workmen into Western countries are taking, I believe, a serious responsi? bility, and will do we'd to consider gravely the possible ultimate effect, rather than the immediate advan? tages to be derived. If the Japans? are brought into any white country they will be efficient in a much slower way than the "boss" has been used to. Even harsh measures will not serve to speed them up. They would suffer extreme torture rather than be driven. If their families do not come with them?and so fat I have not heard that any one has proposed transplanting an entire Oriental city in any country of tho West?who will be so daring as to assert that wholesa c miscegenation will not result?no matter how many laws are made, or how much vigi? lance may be exercised? Let those I who think they know most about this subject come forward and sp^ak ! plainly to the public, but it would be I a pity and a disgrace should argu? ments be based upon personal inter* est and temporary '.-xpediency. Thit ? great question ?s not one of passing moment, but is fraught with p?3? &nd danger to future generations One who has spent enough time or | study in Hawaii to realize these I charming islands are now fairly On* , ental in population, througr the j working of the simplest laws of na** | ure, will ?not, I think, have much to : say in favor of that convenient ! solecism of the melting pot. Hawaii'sj ! mixing cauldron seethes overtime*? ; there are no intervals of quiescence. j The student of ethnology has a fer* j tile field for observation ar??speca jlation. Ti^re ir, every gradation of C0*0r* *A Industrial Hawaii has d?^f? largely along the lines o? "the easiest way." In no territor- "r c0" ony has commercial success been more rapid or more solid. Buttnow, to-day, ?f one could b**" the wizard's power to fourni an idea* ?civilization in these Hawaiian WP jef plenty and ease, wou'd he. * ! open-eyed, self-centred dt'iberat? I care to duplicata the racial heten-'g* ! neity that now exists? . One might xsl: any Am?*?" whose home is ?n Hawaii, and P*1 der a long time over his answer. ? (Copi/rtj/hf, 191?, by Tito Tribune ?M**"1"