CONTINUOUS FOREST PRODUCTION 51 



enlarged. Adoption of standard accounting methods and financial 

 statements will also contribute to this end. Elimination of risk will 

 tend to make bank loans more available and at the same time warrant 

 lower interest rates. The lower interest rates are not necessarily a 

 loss to the banker, however, because the average earnings of loan 

 business may, at the same time, be increased through elimination of 

 losses. 



It is not to be supposed that even if central association bonds could 

 be placed at 5 per cent or under, there should at once be radical reduction 

 of interest charges to members. Since "money talks" as nothing else 

 does, the interest charge to members in Class I (see Table 3) 

 should be, say 5 per cent, and that perhaps 3^ per cent should be taken 

 off the interest charge for each advancement from class to class of 

 membership. This would be a powerful incentive to each concern to 

 advance its standards of management in all phases as rapidly as possible. 

 It would, moreover, be consistent with good financial policy, because, 

 the higher the standards of business management, the less the loan risk 

 and the lower the interest rate justified. These reductions in interest 

 charges could be accompHshed at any time if each bond issue provided 

 that it might be retired with consent of the central association, by 

 issuance of refunding bonds; or each issue might provide a definite 

 interest rate to be paid according to the membership class of the indi- 

 vidual concern at the time interest is due. These interest rates would 

 thus be made to constitute a premium for efficiency, something that 

 must be carefully looked to when we concede certain earnings to 

 industry. 



Considering this question from money lender's standpoint it has 

 already been shown that savings in interest rates are not in nature of 

 savings to the industry and loss to money lenders. They are real 

 savings due to elimination of losses of capital by suitable organization 

 of industry. Since the loss of capital in considerable part falls on the 

 money lender under present conditions he has to charge high interest 

 rates to cover his risk and insure an average return of even as much as 

 4 per cent. Of course, in practice the losses fall on the less astute 

 and the high earnings go to the more astute. This plan contemplates 

 organizing the borrowing powers of forest industry so that as much 

 capital as can be got without risk to the lender can be secured at the 

 low terms warranted by the elimination of risk. The remaining capital 

 needed will have to be drawn from lenders willing to take risk for a 

 consideration and will pay interest rates similar to the present. In 



