CONTINUOUS FOREST PRODUCTION 31 



It seems obvious that it is good business to save $108,000,000 at an 

 expenditure of less than $7,000,000, but the question arises whether the 

 industry today can profit by this. It must be concluded that it can; 

 that this depletion charge is a real charge on the industry as a whole and 

 its saving is a saving to the industry as a whole. It is saved because 

 this future capital (the forest) that will be maintained in producing 

 condition, as a result of these small annual expenditures for protection, 

 taxes and administration of the cut over lands, can be definitely dis- 

 counted to present value, just as a government bond due 50 years hence 

 has a present value. 



It must, however, be admitted that although placing the forest on 

 a basis of continuous production will unquestionably pay better in the 

 future than the timber mine policy, because it adds a return from con- 

 tinuous use of the forest to the return from increase in stumpage value 

 at the same time the depletion charge is saved; still the percentage 

 return from the forest investment cannot be excepted to be much 

 above 3 to 5 per cent all told. Since, as has already been stated the 

 position of the business man is untenable who attempts to operate a 3 to 5 

 per cent investment on 7 per cent capital, this brings us again to the 

 absolute necessity of cheaper capital on forest industry. If we do not 

 get it what will happen? Liquidation is the answer. The capital 

 value must shrink until the income pays the higher interest charge on 

 a lower capitalization. 



There are those who think that this shrinkage of capitalization 

 of the timber is inevitable and not a few who think it desirable on the 

 ground that the present values are " spectdative " and the speculator 

 should be destroyed. Is this the correct view? I think not. Passing 

 over the fact that this shrinkage of value would jeopardize many a 

 timber bond issue and bring other ills on the investor, it is very easy 

 to show that it wiU be injurious to the pubhc. Why? Because low 

 value means lack of care of the resource and wastefulness in its use. 

 Timber, magnificent as it is, in the Pacific Northwest was not considered 

 worth protecting till after the rapid rise in values ending about 1907. 

 Since that time the present splendid protective system has been built 

 up. It will be a public injury to have any slimip in these values followed 

 by decrease in the protective expenditures. Likewise, so long as timber 

 is cheap only the cream of it is taken from the woods. The rest remains 

 to be destroyed by fire. Until about 1900 all the hemlock, an abundant 

 species in the Northwest, was so left in the woods. I see no way to 

 maintain these values unless the expense of holding the timber can be 



