The new capital of 110l. bearing 3½ per cent. interest would be better than the 100l. THREE per cent. capitals for which it would be substituted, in the following respects.—1st. It would carry 17s. per ann. more interest; and such an interest, when the price of an annuity of 3l. is 78l., ought to be worth 22l. 2s. The additional interest, therefore, would be disposed of at 2l. 2s. for every sum of 22l. 2s. (or at 9½ per cent.) less than its true value, compared with the price of the 3 per cent. annuities.
Secondly. The 3 per cents. when peace comes, will probably be capable of being redeemed at 88l.[152] But this stock, in the same circumstances, must be redeemed at par. It will, therefore, produce 12l. more in every 100l. at redemption. Add the 10l. additional stock; and the whole additional sum to be received at redemption will be 22l.—There will, therefore, be a profit at redemption of 10l. per cent. of the money advanced; and this profit deserves the more notice, because the stock to which it is annexed, being redeemable at any time, and bearing a higher interest than the 3 per cents. will be selected for redemption before them; and therefore its price will be so much the more likely always to keep near par.—Setting aside, however, this advantage, and supposing only the 20l. advanced likely to be received at redemption, it may be found by calculating in the manner explained in ([p. 194]), &c. that the substitution of 110l. flock carrying THREE AND A HALF per cent. for 100l. carrying THREE per cent., or, in other words, that 20l. to be received some time hereafter, besides an annuity of 17s. for the intermediate time, is worth in present money more than 20l., reckoning compound interest at 4 per cent.
Such a scheme, therefore, in whatever way its value was rightly calculated, would appear to offer an advantageous bargain. Should there, however, be reason to fear that the public might judge otherwise; or should the 3 per cents. be at 74 or 75, the value might be easily increased near nine per cent. by making the substituted stock 112l. instead of 110l. in which case, the interest for the 20l. advanced would become 18s. 5d. per ann., or a little more than four and a half per cent. instead of four and a quarter.
The advantages to the public which would arise from such a scheme are—1st. That it would be one of the best preparations for measures that must some time or other be entered into for putting the public debts into a fixed course of redemption.[153]—In consequence of being raised to a higher interest, a considerable part of them would be made capable of being redeemed with more ease and expedition; and for this reason, it is certain that, if there remains a possibility of our escaping a public bankruptcy, the time must come when we shall wish all our debts bore a high interest.[154]
Secondly. A capital of TWO MILLIONS AND A HALF would be saved in raising FIVE MILLIONS. That is; the nation in procuring five millions would incur a debt of only half that sum; and instead of having a QUARTER or a THIRD more to pay at redemption than had been received, it would have ONE HALF less to pay.
Thirdly. Such a scheme would keep up public credit; and, by its necessary operation, contribute to carry itself into execution. For the advantages attending it being grounded entirely upon the old 3 per cent. stocks, few at such a time would chuse to sell them, but many would be induced to buy, and, consequently, their price would be advanced, contrary to the common effect of public loans.—These seem to me advantages so unspeakably important, that I cannot but think it would be right to go to some extraordinary expence, in making at least one experiment of this kind. If, in consequence of offering high terms in one trial for a small sum, such an experiment should succeed, it might be renewed on lower terms; and the way might be discovered of managing, in the best manner, larger loans on the same plan.—I cannot help thinking indeed, that it would be found that in this way great sums might be raised without creating any new capitals, or making any addition to the public debts. I fancy, for instance, that few, when the 3 per cents. are about 78, would scruple to pay 25l. for the conversion of 100l. THREE per cent. stock into a 100l. FOUR per cent. stock, provided this last stock was not to become redeemable till THIRTY or FORTY MILLIONS of our present debts have been discharged: And supposing this true, money for public services would be raised at 4 per cent. or at an interest nearly as low as possible; and, at the same time, a sum equal to the whole money advanced would be saved. But were it necessary to take for such a substitution 24l. or even 23l. (that is, to pay about 4¼ per cent. for money) the gain, if our debts are ever to be redeemed, would abundantly overbalance the increased expence of interest.
FOOTNOTES
[48] See Observations on Civil Liberty, page 74.
[49] Of all the writers against this war, the learned Dr. Tucker is the severest. For if, as he maintains, contrary to repeated declarations from the throne, a separation from the Colonies would be an advantage to us, the attempt to keep them, by invasion and bloodshed, deserves a harsher censure than words can convey.
[50] See Observations on Civil Liberty, Part I. sect. 1.