THE ORGANIZATION OF FINANCE IN FOREST INDUSTRY 243 



financial risks, and are entitled to lower interest rates for this reason, 

 also. For example, a forest under efficient continuous production man- 

 agement does not depreciate, but continues to maintain or increase its 

 value. It is entitled to a lower interest rate than an exploitation forest, 

 whose value is dissipated as cutting progresses, oftentimes under con- 

 ditions which forbid setting aside sufficient sums to repay borrowed 

 money. Concerns creating favorable conditions for labor may well 

 receive more favorable interest rates along the lines previously sug- 

 gested by the writer.^ This is strictly sound finance, because industrial 

 experience has amply shown that such concerns are on a basis of more 

 stable income, that "being human is good business." 



INTEREST RATES ACCORDED DIFFERENT CLASSES OF LOANS 



Under the principles set forth in the preceding paragraphs, the writer 

 conceives that various forest properties and industries are entitled to 

 consideration in interest rates in approximately the following order : 



(i) Forests under continuous production management in the hands 

 of the Federal Government, States, and municipalities, where the gen- 

 eral public credit, as well as the properties, are pledged, say, 4 per cent 

 interest (when interest rates are normal). 



(2) Similar forests where only the properties themselves are pledged 

 as security, 45^ per cent interest. 



(3) Privately owned continuous production forests, 4) 2 to 5 per cent. 



(4) Private exploitation forest, where the bonds must be retired 

 serially as the timber is cut, 5 to 5^^ per cent. 



(5) Sawmills, pulp and paper mills, wood-distillation plants, and 

 other proven industries supplied by forests managed under continuous 

 production, hence guaranteeing permanent supply of raw material, 5 

 to 6 per cent. 



(6) Similar plants dependent on exploitation forests, where supply 

 of raw material will be uncertain, 6 to 8 per cent. 



(7) Less-proven industries dependent on continuous production for- 

 ests, 6 to 8 per cent. 



(8) Similar industries dependent on exploitation forests, not loan- 

 able. 



LOAN RESTRICTIONS 



A few necessary restrictions on certain classes of loans may be men- 

 tioned. Continuous-production forests should, obviously, have first 

 call on loan capital. The most urgent restriction should be exercised 



'Journal of Forestry, January, 1917, pp. 32 and 33. 



