,Jf ST *T* v ¥ ' y THE UNIVERSITY OF ILLINOIS LIBRARY A PLAN FOR PAYING OFF THE PRESENT Rational Debt, IN FORTY-TWO YEARS, WITH A &tntttng .dFunH OF ONLY FIVE MILLIONS. Uonfton : PRINTED FOR J. RIDGWAY, PICCADILLY. 18*2. J. GKKEN, rRINTF.B, LEICESTER S TREST, LLICUS1 EK SQUARE. ADDRESS I take no merit to myself, that the idea con- tained in the following letter, has first arisen with me ; it occurred in the accidental way there related, and appearing of more and more im- portance to the public each time that I returned to the subject, I disembarrassed myself, by sending it where I thought it would be most likely to be made useful ; and there I should have been satisfied to have left it, had I had any notice of its reception, or knowledge that the merits of the plan were under consideration : in the absence of that information, I feel myself embarrassed, as before, and that there is a duty still cast upon me, to give it to better heads than my own, by its publication, and among whom, there can be no doubt, its futility or ca- pable application, to the Sinking Fund, will best be found out. RICHARD MOORE. May 10, 1822. LETTER TO THE RIGHT HON. THE EARL OF LIVERPOOL. Hampton Court Palace, 24th April, 1822. MY LOUD, I have the honour to throw myself on your Lordship's indulgence, in communi- cating the ideas that have occurred to me, on considering the official paper, from the Trea- sury, laid upon the table of the House of Com- mons, the 18th instant, relating to the proposed five millions, as a sinking fund — the prices there taken for the purchase of stock being at 75, 78, 81, and 84. It appearing to me, that, assuming the funds to be at 80, no less a saving than one million in every four, with all its at- tendant advantages, might be made to the pub- Tothe Right Hon. the Earl of Liverpool. lie, by a different mode of applying the money, than is proposed ; and which your Lordship will at once see the practicability of, when I tell you my proposal is, that, instead of purchasing stock at the price of the day, that the commis- sioners, for paying off the National Debt, shall be empowered and directed, by act of parliament, to divide the five millions, or such portion of them, as were applicable to each quarter, into as many fractions, as there are <£100 3 per cent, stock, to be paid a dividend on ; and to oblige each stock -holder to receive such fractional parts, ap- plicable to the number of ,£100 stock he pos- sesses, in discharge of so much capital 3 per cent, stock, as the fractional money would buy, at the price of J60 the <£100 stock. He would have so much less interest, at 5 per cent, sterling, on the money received by bim* for his proportion of capital stock paid ofi^ each succeeding dividend day ; — and the public would have so much more money, to apply at com- pound quarterly interest, in discharge of the National Debt ; which, as the rate would not vary, from a 5 per cent, interest, and as money so kid out, will more than double itself in four- teen years, I need not point out to your lordr ship, would also, more than pay off the present National Debt in forty-two years. There must be a good deal of detail con- nected with such an arrangement ; and as it ought to affect the 5 and 4* per cents, which I will not trouble your lordship with, without being honoured by your commands to do so. But it remains, perhaps, that I should add some- thing, as to the justice of paying off a stock, that bears a market price of <£70, or <£S0 per 100, at only £60. And which seems to me to rest precisely upon the same propriety as the reducing the 5 to a 4 per cent.; stock ; the justice and use- fulness of which, will not now, I presume, be disputed. And that the fractional stock to be paid off each successive dividend day, would be too small to have any effect on the price of the fundsf, for a series of years — that before the lapse of the forty-two years, more wars must probably ensue — and that there is no other method of applying a sinking fund of only 5,000,000, that so soon offers to the country the means of resisting aggression, without incon- venience to her finances — and therefore none * And also trust-money, the fraction on the 4 per cents, stock should perhaps be one-third more than on the 3 per cents. t U would tend to increase the price of stocks. 8 that could so much tend to the support of her Public Credit. That the price of stocks, at present, is much higher than any modern contractor of a loan has paid for ^100 3 per cents. — that such stock has equally been below £60 sterling, as above it, in price, was contracted for, subject to such fluctuation ; and as the remainder of the sub- scribers d£100 sterling, beyond the price given for the i^lOO 3 per cents, was always made up to him, by so much more stock, as the dif- ference in money was worth at the time, with a bonus, as his inducement — where is the pre- tence, that the Fund Holder can now have a right to demand £40 sterling, or any portion of it above £60, a second time, for this stock ? — merely because the fund bears the name of a J100 stock ! Or, where is the propriety, or justice, in the country paying <^100, for what she has received little more than £&) — sometimes not so much — or any thing above . the £60 — and after the creditor, having received the whole of what he lent, by a saleable value in stock, and something more ? Do not the times require some alteration, in such an extravagant, and almost impossible mode of paying off our debts ? — And alter the actual payment of 400,000,000 of debt, should not the obsolete and imaginary claim, to receive money for stock, be now put an end to ? I beg pardon, my lord, for detaining you so long, and for the liberty the subject has impelled me on to take, in addressing your lordship, though a stranger to you. I have the honour to remain, With great respect, My Lord. Your Lordship's very humble servant, RICHARD MOORE. To the Right Hon. the Earl of Liverpool. SUPPLEMENT. As there were some loans formerly made, where J100 in money was given for a 3 per cent, interest, and which gave the name to this stock, though, I believe, to no large propor- tion of our debt, even in 1892, it may be as well to examine the practice, consequent upon it, a little farther. Government, since the establishment of Mr. Pitt's sinking fund, has constantly taken, for the country, on their purchases of stock, the dif- ferences between the market price of the day, and the c£100 ; but why not also take the dif- ference between the market price, and the c£60 ? The practice has arisen, I will suppose, 1st, That the Stockholder should receive the largest sum possible for his stock, under the idea, that the purchases made by Government were the 11 must likely means to raise the price of it ; and, 2dly, that by raising the price, we advanced our country's credit ; thus, when the funds are at par y we pay at the rate of £40 the hundred for our situation, and so in proportion ; but less and less abundant, as our pulse beats low, as our credit declines to ,£60. Now, if it tan be shewn, that the market-price would not be affected, by a steady payment of £60 per £100 stock, for that which was paid off by Government on the divi- dend day; the stockholder's interest, and the high credit of the country, must equally be untouched ; and our present practice will no doubt be dis- continued. When the Commissioners for paying off the National Debt, first went into the market to buy stock — say it might be bought at 67, and it was bought at all prices — none of the stock-holders turned round upon the Commissioners, and said No, we will not take your money, for you owe us not £67 \ but £100 ; neither did the Go- vernment then, or since, think themselves bound to pay more than the market-price — the stock- holders, therefore, have themselves abandoned their claim to receive .£100 money for £100 stock — and the Government their obligation to pay it. And in this way, four hundred millions of debt have been paid off — that now, none of the stock raised on the old loans, can be sup- posed to remain — the claim to receive £100 money for £100 stock hns therefore vanished. 12 It is a maxim, 1 believe, of all political writers, that great states, whatever smaller ones may do, should never enter into commercial con- cerns, on their own account — much less should they go into a market, and compete with their subjects, in raising the price of their own bonds — for these reasons : — First, because the stockholder could not want purchasers, though the Governmnnt did not appear in the market ; for, secondly, the paying off the stock, by purchase, at a greater price than the £60, tends to depress the fund-holders' property — not to raise it — inasmuch, as more stock would be taken out of the market; by the payment, than by the purchase, the supply would be less — the demand more. For instance, let the example be at simple interest: if I have to pay ^£60 the hundred, for the stock, the five millions, sinking fund, will take out of the market ^£8,333,333 stock. But if I have to purchase at the assumed price of J80 the hundred, the same sum will only buy ,£6,250,000 stock; there will therefore be a demand of J2,083,333 stock more by this mode of discharging our debts, than by the present system. In fact, the country would get for three mil- lions, what she now pays four millions for ; — and this increasing by a compound interest, the greater reduction of stock at market, in conse- 13 quence, must so much the more tend to raise its price. Again, — assuming the debt to be only £500,000,000, if you reduce this sum, and the five millions sinking fund, to figures, you will find, that the fraction, applicable to each £100, to be returned to the stock-holder, as capital paid off, will be about twenty shillings ; but on which, if laid out again, at 80, the difference of interest, about three-pence half-penny, would be the loss, the first year — in practice, not more than perhaps two-pence per 100, but increas- ing, by very small fractions, each year, cer- tainly. The stock-holder would, however, have a large set-off against this evil, by the increased price the stock must bear, as it diminished in quantity, if no more debt accrued — if more debt arose, the advantage of a diminished loss, by sharing the burden with the new stock-holder. Thus, for so small a loss, as perhaps two- pence, on each £100 stock, might the country be saved ,£1,250,000 this very year ; assuming always the price of stock to be at £80, that is, you would have the above sum, out of the five millions, to purchase so much more stock with, beyond what the present mode of paying off the debt affords. But, whatever the market-price was, the na- tion would have the incalculable benefit, of a 14 constant, uniform,* legal price to diminish her debt by, without interfering with the stock- holder. He would hate the same £SO for his stock, whether Government agents appeared in the market, or kept out of it ; but with the greater chance of receiving more by their absence, than by their presence. This may appear a broad assertion, but can it be denied, that there is not more stock taken out of the market by the one method, than by the other ? If supply and demand have their usual effects, therefore, this must happen ; the quick- silver, that shews the high credit of the state, — still rises, — and the two positions, that were to be proved, are made out. —It follows, also, I am afraid, that the £%6 difference has hitherto been very needlessly laid out by the commis- sioners, and been a dead loss to the country. But let it not be supposed, that I mean to attach any blame, or censure to the high-minded statesmen of all parties, under whom the pre- sent system has been pursudje if the idea, here set forth, of getting rid of the debt, by fractional payments, on the leg-al* capital of it, had oc- curred to them, as it has, most acci&etittdly \ to me, the practice would assuredly have been al- tered ; as it is, it only forms an example, that, * Vide the statute of Queen Anne against Usury. 16 with all our information, how very young we still are, in the knowledge of finance. And it is very curious, and is a strong reason for considering the subject this present session, that besides the loss to ourselves of ^1,250,000, the difference to posterity, by deferring the con- sideration to another year, would be, at the end of forty-two years from this date, no less a loss to them, than forty millions of money. The process runs thus : — the five millions produces its own capital in fourteen years, or ^100,000,000, which, m stock, would be <£140,000,000, with a sinking fund at command of ^610,000,000 ; in twenty-eight years the debt paid off would be ^420,000,000 of stock, and a sinking fund of ^20,000,000 at command ; in forty-two years the debt paid off would be ^980,000,000 of stock, with a sinking fund at command of .£40,000,000. So bountiful has Providence been in furnishing us with re- sources ! if we do not desert our own interests ! ! By the official paper, alluded to in the letter, the stock purchased at 75, 78, 81, and 84, by the five millions in ten years, is, in stock, at 75 o£80,040,708 78 . 76,415,390 81 . 73,101,437 84 . 70,060,6CG 16 and the debt paid off by the same paper, was ^408,970,095 stock. The amount of capital realised at the same period of ten years, by the idea of quarterly fractional payments, on the one hundred pounds stock, is, in money, about sixty-five millions of pounds, and in stock nine-one millions of pounds ; I leave it to those who have the curio- sity, to take the difference. The decision required is, whether we are in future to consider these misnomered bonds of £60, as what the statute law, points out they really are, assimilating- a three pound annuity, to a sixty pound capital, which is a certain thing, that we know what to do with ? Or shall we go on treating them, as the repre- sentatives of a fictitious ,£100, that neither can, or ought, ever to be paid by government ? It is the securer annuity, the loan-contrac- tor, and the stock-broker, buy and sell, gua- ranteed upon the revenues of this great coun- try ! which enhances its price beyond the usual regulation ; not the imaginary capital of a £100 that he pays for. The contractor always gets more than he pays, and thereby looses his preten- tions to any second remuneration. There is a small loss of interest to the fund- holder, by having his debt paid in this way, no doubt ; but what creditor, can find fault with his 17 debtor, for paying what he owes, or what morr - gagee complain of his mortgagor, because he cannot get such good interest for his principal, after it is returned to him, as before. Is it a sufficient reason for continuing to pay £4 in the place of £3, always assuming the price of the funds to be at 80. Four millions, instead of three millions, — that our mortgages to the stock- holder, may be delayed paying, for his profit only, to the latest possible period ? In one case we have seen that our present national debt may be paid off in 42 years ; that the mode of doing it offers many halting places ; where the accumulation of the sinking fund, with the addition of some such measure, as an income tax, promises us the means to defend ourselves, when necessary, without an unmanage- able addition to our national debt ; for we must be prepared to expect more debts ! In the other case, the debt may be paid off in 60, 70, or 80 years, nobody can say when ; periods as wide, and as fluctuating, as the prices of the annuities, in the market ; and that only by an expense of scores (I had very nearly said hundreds of millions) beyond the other mode, but let those who feel interested, — calculate. — That it is impossible to contemplate any future war, without expecting a new debt, that must overwhelm us ! — one mode secures our in- 18 dependence, — the other almost seems to court destruction ! — It is the case of Shylock : — " I will have my bond, speak not against my bond ; I have sworn an oath, that I will have my bond." And if any such there are, in this favoured land ; — and who will still enduce the penalty — The pound of flesh ! The hundred pounds ! ! Their country's bankruptcy ! ! ! Their fate, will be as certain ; as that of Him of Venice. THB END. «>IWH, PRINTER, reiCf&TCR STREET, i-WCKSTEB SQOARS. / . -J .' ., x I < v /. 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