In spite of the general discredit of our national stocks abroad, Massachusetts fives payable in 1894 sell at the nominal price of 84, with the pound sterling at $4.44, equal to 91½ in our gold, with the pound sterling at $4.83. There can be no other reason for this higher price than the superior credit enjoyed by Massachusetts; and thus again is Public Faith exalted. Why should not the Nation, with its infinite resources, surpass Massachusetts?
The bill before us proposes a new issue of bonds, redeemable in coin after twenty, thirty, and forty years, with interest at five per cent., four and one half per cent., and four per cent., in coin, exempt from State or municipal taxation, and also from national taxation, except the general tax on income,—these bonds to be used exclusively for the conversion of an equal amount of the interest-bearing debt of the United States, except the existing five per cent. bonds and the three per cent. certificates. These proposed bonds have the advantage of being explicit in their terms. The obligations of the Government are fixed clearly and unchangeably beyond the assaults of politicians.
A glance at the national debt will show the operation of this measure. The sum-total on the 1st of February, 1868, according to the statement from the Treasury, was $2,514,315,373, being, in round numbers, twenty-five hundred millions. Out of this may be deducted legal-tender and fractional notes, as currency, amounting to $388,405,565, and several other smaller items. The following amounts represent the portions of debt provided for by this bill:—
| Six per cent., due 1881, | $ 283,676,600 |
| Six per cent., five-twenties, | 1,398,488,850 |
| Seven and three tenths Treasury notes, convertible into five-twenty bonds at maturity, | 214,953,850 |
| $1,897,119,300 |
This considerable sum may be funded under the proposed bill.
If this large portion of the national debt, with its six per cent. interest in coin, can be funded at a less interest, there will be a corresponding relief to the country. But there is one way only in which this can be successfully accomplished. It is by making the Public Faith so manifest that the holders will be induced to come into the change for the sake of the longer term. All that is done by them must be voluntary. Every holder must be free to choose. He may prefer his short bond at six per cent., or a long bond at five per cent., or a longer at four and one half per cent., or a still longer at four per cent. This is his affair. There must be no compulsion. Any menace of compulsion will defeat the transaction. It will be nothing less than Repudiation, with a certain loss of credit, which no saving of interest can repay. You must continue to borrow on a large scale; but who will lend to the repudiator, unless at a destructive discount? Any reduction of interest without the consent of the holders will reduce your capacity to borrow. A forced reduction of interest will be like a forced loan. While seeming to save interest, you will lose capital. Do not be deceived. Any compulsory conversion is only another form of Repudiation. It is tantamount to this declared crime. It is the same misdeed, taking still another shape,—as Proteus was the same heathen god in all his various transformations. It is Repudiation under an alias.
Happily the bill before us is free from any such damning imputation. The new bonds are authorized; but the holders of existing obligations are left free to exercise their judgment in making the change. I am assured by those who, from practical acquaintance with business, ought to know, that these bonds will be rapidly taken for the five-twenties.
The same bill, in its second section, sets apart $135,000,000 annually to the payment of the interest and the reduction of the principal of the national debt; and this is to be in lieu of a sinking fund. This is an additional security. It is another assurance of our determination to deal honestly.
The third section of the same bill is newer in its provisions, and, perhaps, more open to doubt. But, though uncertain with regard to it in the beginning, I have found that it commended itself on careful examination. On its face it provides for a system of conversion and reconversion. The holder of lawful money to the amount of $1,000, or any multiple of $1,000, may convert the same into the funded debt for an equal amount; and any holder of the funded debt may receive for the same at the Treasury lawful money, unless the notes then outstanding shall be equal to $400,000,000. If bonds in the funded debt shall be worth more than greenbacks, the latter would be converted into bonds according to the ordinary laws of trade. The latest relation of these two is as follows: $100 greenbacks equal seventy-one dollars gold; $100 five per cent. equal seventy-six dollars gold. If the greenbacks are convertible into the five per cent., they will, of course, be converted while the above relation continues. This must be so long as the national credit is maintained abroad and the demand for our securities continues there. By this process our greenbacks will be gradually absorbed, and those that are not absorbed will be lifted in value. It would seem as if bonds and greenbacks must both gain from this business, and with them the country must gain also. Here would be a new step to specie payments.