, 1869-06-10
THURSDAY, JUNE 10, 1869.
THE SINKING FUND DELUs1OH.

Z
The New York Independent has mn article
on the power Of linking fund to c1tin-
euish debt, seeking to prove that by apply
ing the surplus funds Of the government to
the purchase Of its OWL bonds, TO be placed
IN sinking fund, something more can be
nu.de than would bo made by using the
same money to purchase md cancel the
bonds Tue InN<pendent says:
.sThe creation Ct q Ktnkiug fund, by annually
t4ttinr arzst comparatively ANAL portion Of the
fterpl- Of y corIuTstfon q government, invest
lts the 1irrEnt IN ln:erckt-bcaftng securities and
t!c ratne ps1ose is ono OF the simplest, easir.t
acd Eurrst modes Of preparing 10 ray debt at
The tine Ct It's j asuEty. Tne PRINCIPAL distributes
the hCrden In tra1ll quantities over q series OF
tca7e, and SECURES TO the find rapid accumulation
t,y unnunlff ~rnidnHuA4Y eoApvuhdiaJ the in
ttrt4t We regard It Is the very best OF methods
In rrprtdjn. 1nr debt thai runs for . term Of
.ca1r II prupeYly adjusted 10 tho work TO be
tlrne, fl viii hlway s secure the result"
II then proceeds to cite the examples Of The
sinking tunds for the e1inguishment OF tho
clnal debt Of The State Of New York, the
bounty loan debt Of the State Of New York,
the water loans Of New York and Brooklyn,
etc, as examples III which the peculiar ho-
crs-pocus Of sinking fund has ennhled the
corporations to pay of more Of their debt
than they could have paid by buying their
obligations in the market md destroying
thin
Although the sinking funds Of railroad
companies md other corporations DO not
accomplish the object Of extiuguishing eer-
tain debts sooner than it would be accom-
,,lsAbed by tho purchase and cancellation of
their own obligations, it is only because the
money i. used to purchase other securities
ilnn their Own, which, by reason Of the
higher rate Of interest, affords larger re-
turn for the investment than the corpora-
ton is poying on its own debt Thus, il
John Smith has notes outstanding for ten
thousand dollars bearing seven per cent in
,ercs., and has one thousand dollars in
lconcy which he wishes to apply
10 the payment Of tho debt
of bis notes which hare not get matured,
he can find an advantage By buying some
other security, which, by reason Of the dis
count ut which he can buy it, OF the high
1ute of interest which it bears, will afford q
larger return than il he purchased his own
noies. II be buys his own notes, ho can
make nothing more than the discount at
which he may be nble to purchase them,
and the saving Of the interest II he buys
other mems notes at lower prico than he
can buy his own, hc may make something
1y tho operation. This is all the eztrn profit
that can be made by sinking fund. In
this way corporntions do make a profit by
purchasing other securities than their own.
But these cases are not ut all analogous
10 that Of the Government Of the United
States. It cannot purchase my hut ita own
securities, aEd therefore IT cannot make any
proGt except the discount at which it pur-
chases Its bonds, md in the saving Of the
interest. These objects would be accom-
plished to precisely the same extent If tho
bonds were cancelled On the instant of their
purchase. Therefore we aay TINT the no
ton that anything more can be acoom-
rliahed l,y placing tho bonds in sinking
fund than by canceling them at once is a
sheer delusion. Until D man can lift him.
self up by his boot-strape, or accomplish
perpetual motion, no profit can be shown
by the government paying interest to itself
and using this interest to buy more Of its
OWL bonds. This same experiment was
hied in England fifty years ago and was
exploded on scientific principles by Mr. Ri
cardo. II vas abandoned as useless and
worse than useless, because tho machinery
by which it was operated was itself e1pen-
Kivc. without the slightest corresponding