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necessary to loan them at lower and building construction. The demand lower rates.

What, then, is the outlook for the future with respect to the supply of and the demand for capital? There is no likelihood that the savings of our people will decline. Production is large, and the habit of devoting a portion of our output to provision for the future has become firmly established with us. From our corporations, which set aside roughly one third of their profits as surplus, down to the laborer who is paying for a home or making installment payments on his automobile, the practice of saving is established. As long as production maintains its present high level, the supply of capital will be large.

When business depression comes and reduces output, savings will doubtless fall somewhat, but they will not decline as much as one would expect. People are more cautious about spending in hard times, and so continue to save even out of reduced incomes. The supply of capital in this country will continue to flow into the investment market in large volume.

On the demand side the outlook is rather for a decline than for an increase. During the war many things were left undone in order that we might supply our armies and navies with goods and services. The post-war period began with a large deficit in the supply of buildings, in railroad improvement, and in public-utility facilities. The building industry has, therefore, been at high tide for some years. At the close of the war the automobile was an instrument of transportation which appealed to all classes and which was already well beyond the experimental stage. But there were less than six million machines in use, while from that time to this the number has grown to twenty-two million. Such an expansion made a widespread demand for improved highways. The immediate future gives no promise of an increased

'emand, either for automobiles or for

for increased public-utility and manufacturing plants and for railroad facilities will undoubtedly continue, but hardly at a higher rate than we have seen in the last five years. Our domestic demand for capital is therefore not likely to increase.

Nor is there a prospect of greatly increased borrowing from abroad. The European nations, especially Germany, have been bidding actively for capital in America during the last three years. That source of demand will hardly continue in large volume. France, despite popular notions to the contrary, does not need to borrow capital and will not do so. She may refund a few loans which are already outstanding, but she will not demand new capital. For France is essentially a capital-exporting nation. Unless Russia can reorganize herself politically and industrially in such manner as to command confidence in our capital market and so become a borrower, the demand from Europe for American capital is certain to decline after 1928. The less developed nations of South America and the Orient will borrow considerable amounts of capital, but upon the whole the outlook is not for any considerable increase. It is a safe prediction that the total demand for capital in the next half-decade will not increase as rapidly as does the supply of our investment funds.

With this outlook for capital accumulation and for investment demand. the investor will undoubtedly be obliged to content himself with smaller returns upon his funds. There have been periods in the history of this country when good railroad and industrial stocks sold at a price which capitalized their dividends at 4 per cent and their earnings at 6 or 7 per cent. High-grade bonds sold on a 33 per cent basis; and good government securities yielded even less. Toward such an era our industrial process is carrying us to-day.

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