The Sun.
London, England, 1853-05-19 00:00:00

THE BUDGET AND, THE MONEY MARKET.

( From the Morning Herald.)
We have anxiously waWied the proceedings in the
Money Market- as to the 'dealings with Mr. Glad-
stone's fantastical stock. Our readers will perhaps
.do us the justice to recollect- *atm() predicled the.
-failure of this somewhat crochetty scheme, in which
that eccentric gentleman proposed to lessen the
burden of, the. National Debt by enabling the pub-
lic creditor to alter his demand from one species
of security to another as and when it suited his
own interest and answered his own purpose. We
pointed out the broad and glaring difference be-
tween this conversion and every similar operation
that preceded it.
Upon all former occasions the Chancellor of the
Exchequer, the agent of the public, came to the
public creditor, and said, " I offer you certain
terms ; if you do not agree to them we must cease
our dealings ; here is your money, and we are
quits." Mr. Gladstone's proposal is the first in-
stance in the history of British finance in which
the public creditor has been dealt with except by
an offer, the refusal of which was to be followed by
the payment of his debt.. To propose to the owner
of stock either to stay as he is, or to substitute his
present security for another, exactly as he pleases,
may be a very liberal thing to that owner, but
seems, after all, au odd way of benefiting the
debtor. To complicate the transaction by offering
him three options is only one of those efforts of
elaborate trifling by which transparent folly endea-
vours to disguise itself under the cloak of solemn
mystification. Common sense is perfectly sufficient
to tell any man that the person who holds a security
upon the national resources will only change that
security for something else because he thinks that
something else is something better than that which
you ask him to give up. If you offer him an
equivalent, he will, in all probability, make no
change ; although in this case the love of novelty
may induce some speculators to accept a new form
of investment. But it is quite manifest that if you '
attempt to benefit the public by offering him that
which is not an equivalent—and this is the only
way in which the public can be gainers in the
transaction, we apprehend—it needs no very
deep skill in finance to predict that even that
very gullible animal, the public creditor, will
not be quite so simple as to accept your obliging
offer.

We urged these considerations while the whimsical
bill of .Mr. Gladstone was paSSing through Parlia-
ment with a rapidity, and, after all, an absence of
determined opposition, which, to those who have
watched Parliamentary measures, was a feature in
itself sufficient to create strong suspicion that the
measure was something peculiarly ill-advised. We
anticipated, indeed, from the passing of the bill no
very great extent of mischief, because the operation
was at best but a small one, and we never had any
very serious apprehension that even small as it was
the experiment would succeed. We had not the
perfect confidence or the gullibility of the fund-
holder which the Chancellor of the Exchequer
seemed to entertain ; and although oven on the
Stock Exchange wo knew that some old children
might be caught by the navelt3r-of a new toy-, we
had a very strong impression that Mr. Gladstone's
financial plaything would occupy that place in the
list of British stock to which might be added the
comment " more .for ornament than use." The only
real evil of the enactments was, that it tended in
some degree to discredit the whole system of our
finance. It does•not become the economy of a great
nation to play little tricks with the petty portion
of an enormous debt.
The " three courses" of the Chancellor of the
Exchequer are, however, now fairly before the
stock-holding public, and for so far the most san-
guine friends of the right 'honourable gentleman
must confess they have been three failures. The
insignificant amount taken in any of the new
stocks is not more than in this age of bold specula-
tion any project gravely recommended by a Chan-
cellor of the Exchequer would be sure to com-
mand. It may be said that if the project fails, no
harm is done. The measure is simply inoperative,
and to the extent to which it is inoperative it can
do no harm. In one sense, we doubt this is true.
Nevertheless, it is also true that the Chancellor of
the Exchequer has so complicated his calculations
of the success of this project with his general finan-
cial arrangements that there are serious incon-
veniences likely to follow its failure which it may
not be amiss thus early to point out.
In the first place let us advert to that which we
believe to be the lesser inconveniences we antici-
pate. It will be recollected that Mr. Gladstone's
calculations present the prospect of a very
small
surplus on the estimates of the year. He has cal-
culated a surplus of little more than 400,000/.
But of that surplus 100,0001. is composed of the
item of saving in the interest of the National Debt
to be effected by the now financial arrangements.
Since his financial statement he has consented to a
provision that all the saving on the Two-aud-a-
Half per Cents. is to form a sinking fund for the
redemption of the debt. Ho will certainly be a
very bold man who will say that it is now.
for sufficient of the Three-and-a-Half per Cent.
Stock and the Exchequer Bonds to be taken to
realise the estimated saving of 100,000/, upon the
interest. possible
_ _ _

It is not only, let us say, that the disappearance
of the best part of 100,0001. from a surplus so small
as 400,000/. is in itself a matter of some moment
in the calculations of the year ; but a miscalcula-
tion of resources thus early detected is very well
adapted to shake our confidence in the more ab-
struse and more questionable calculations upon
which the residue of the surplus depends. We
shall not, WO confess, be surprised at the end of the
year to find that residue as imaainary as the
saving on the interest of the debt, and that for the
first time since 1841 our expenditure shall have
exceeded our income on the sth of April, 1854.
There is another result of the failure of this
scheme—a result now, we fear, too manifest to
need much sagacity to predict. 'Mr. Gladstone, it
will be remembered, has positively pledged the
faith of the nation to pay off 10,000,000/. in hard
cash of the South Sea and other similar stocks, in
case the holders of that stock will not agree to
accept of some one of the newly-created securities
instead. With this amount of the National Debt
he is dealing on the old compulsory principle of
offering the creditor his money if he will not accept
the new terms. But so confident was he that the
new stock would be accepted, that he made no
provision, in case it should not, for the raising
the ten millioni by a new loan. The holders of
the South Sea Stock are not accepting, and they
are not at all likely to accept, the new stocks.
The result, therefore, will be that Mr. Gladstone
must, at the expiration of his notice, be prepared
with the best part of 10,000,000 of sovereigns to
pay them off. Mr. Gladstone tells us, indeed, that
he can use the balances at the Exchequer for that
purpose, that is, that the nation has generally lying
at the Bank of England a cash balance of about
8,000,0001. or 9,000,0001., which he can use if these
stockholders obstinately insist upon their money.
That a very large proportion of them will so insist
we fear is now too evident. Seriously to propose
withdrawing the whole of the national balance from
the Bank of England for the purpose of paying off
this debt would be, independent of all other con-
siderations, to derange the monetary dealings of
the Bank f England, and, therefore, of the coun-
try, to an extent which, at a time of commercial
difficulty, would be ruinous, and which, even in
the present supply of gold, would involve conse-
quences too serious to be risked.
It is well that the country should be warned in