[98] See the Abbe Raynal’s Reflections on this subject at the end of the 18th book of his History of the European Settlements in the East and West-Indies.—“Is it not likely, says this writer, that the distrust and hatred which have of late taken place of that regard and attachment which the English Colonies felt for the parent country, may hasten their separation from one another? Every thing conspires to produce this great disruption; the æra of which it is impossible to know.—Every thing tends to this point: The progress of good in the new hemisphere, and the progress of evil in the old.—In proportion as our people are weakened, and resign themselves to each other’s dominion, population and agriculture will flourish in America; and the arts make a rapid progress: And that country rising out nothing, will be fired with the ambition of appearing with glory in its turn on the face of the globe—O posterity! ye, peradventure, will be more happy than your unfortunate and contemptible ancestors.”—Mr. Justamond’s Translation.
[99] Had this interest been insufficient, it might have been increased a 16th or even an 8th per cent. without any material difference; or, (which would have been better) 3½ per cent. might have been offered for four fifths of the sum borrowed, and 4 per cent. for the remainder; in which case, the annuity payable by the public would have been 65,790l.
[100] It should be remembered here, that tho’ Government, when its debts are at a discount, may be able, with the consent of the creditors, to redeem a given capital by paying a less sum than that capital; yet it can never be obliged to pay more.—In other words; a 100l. capital in the 3 per cents; 3½ per cents; or 4, or 5 per cents, Government is always at liberty to redeem by paying 100l. whatever the market price of it may be, and whether the creditors will consent or not.
[101] There is another very great advantage which would attend these annuities.—One and the same surplus would discharge a given capital in less time. For example. A surplus of a million per ann. invariably applied, and the first payment to be made immediately, would discharge a capital of a hundred millions bearing 3 per cent. interest in 46 years. But if the same capital bore 3½ per cent. interest, it would be discharged in 43½ years; if 4 per cent. in 40 years; if 5 per cent. in 37¼ years.—A capital less than a 100 millions, in the same proportion that the interest is more than 3 per cent. and for which, therefore, the same annuity is paid, (as in the present case) the same surplus would discharge in 39 years, if the interest is 3½; in 34¼ years, if the interest is 4 per cent. in 27¼ years if the interest is 5 per cent.—Supposing, therefore, 75 millions borrowed in the manner of our Government, by creating a capital of a 100 millions bearing 3 per cent. (that is, by selling 3 per cent. stock for 75l. in money) which might have been borrowed by creating a capital of only 75 millions bearing 4 per cent. (that is by selling 4 per cent. stock at 100) there will not only be a loss of 25 millions by a needless increase of the capital; but also a loss of 14 millions, by an increase of the time in which one and the same saving will discharge the two capitals.—This may be proved in the following manner.—A million, per ann. will, in 34 years and a quarter, very nearly discharge a debt of 75 millions bearing interest at 4 per cent.; but the same saving will, in the same time, discharge only a capital of 61 millions, if it bears interest at 3 per cent. When, therefore, such a saving has compleated the redemption of the one capital, there will remain unpaid of the other, 39 millions.—What has been now applied to a large sum holds true in proportion of any smaller sums.
It appears from hence to be a very wrong observation which some have made; “that provided the annual charge is the same, it signifies little what the principal of the public debt is.”—As there is no way of removing the annual charge but by paying the principal, it is of just as much consequence what it is, as whether it is practicable or impracticable, to remove a burden which weakens and cripples, and must in time sink the public. An annuity of Six Millions, if the principal is Hundred Millions borrowed at 6 per cent. might be redeemed in 33 years with a million per ann. surplus. But if the principal is Two Hundred Millions bearing 3 per cent. the same surplus would, in the same time, pay off only 56 millions; and but little more than a quarter of the annuity would be redeemed. If, therefore, the same sum might as well have been obtained by creating a principal of a hundred millions bearing 6 per cent. as by creating a capital of two hundred millions bearing 3 per cent. there will be a needless expence, in discharging the debt, of 144 millions.
[102] The price of the 3 per cents at the time of this loan (in the beginning of Feb. 1759) was 88½ and 89.
[103] The 3 per cents just before this loan were at 69l. and, consequently, 5 per cent. interest, (or 3l. per ann. for 60l.) would have afforded subscribers a profit of 9l. for every 60l. advanced. The long annuity was worth, as the stocks then stood, 21 years purchase, and the short annuity, 13 years purchase. Upon the whole loan, therefore, the profit would have been 3 per cent.
[104] That is, the difference between 12 millions, and the sum bearing interest at 3 per cent. which a million per ann. would pay off, in five years and a quarter.
[105] The 3 per cents being at this time at 80l. an annuity of 3l. purchased for 75l. would have produced a profit of 5l. Therefore these schemes are of exactly the same value. But they are too narrow; and the subscription this year fell immediately to one per cent. discount. But in the scheme I have proposed this might have been prevented by only offering 4 per cent. for 77l. or 78l. (instead of 75l.) of every 100l.
[106] It is plain, that this capital, as well as the former, might have been a quarter (or 60,000l.) less, which would have made the whole saving of capital 2.060,000l.