The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1874-02-18

to the Country.
1t has been observed by scientific writer's
that as nations progressed in civilization and
refinement the market rate of interest on loans
of money continually fell. Thus in the thir-
teenth century, in maritime Europe, the mar
ket rate of interest on the best securities
averaged over fifteen per cent per annum' al
though in Venice-at that period the best
governed country in the world-it was as low
as four per cent. By the eighteenth century
the average market rate on similar securities
had fallen to less than three per cent. This
tendency of the rate of interest to fall-a ten
dency which continues to this day-was COM
monty ascribed to the increase OF commerce
and national wealth, which are the explana-
! tons advanced first by Sir Josiah Child, and
a century later by Sir John Sinclair, the two
best informed English writers on the subject
in their respective days. More modern re-
searches have, however, established the fact
that it is due as well to the increased
security afforded by better administration
of justice ''High interest is only another
name for bad security" said the Duke of
Wellington while Premier of England; and
his terse opinion appears to be ratified by both
the experience of nations and the conclusions
Of science.
OF course there is q limit at which this
tendency of interest to fall must STOP This
limit is somewhere about three per cent per
annum-a fact established by the net rate at
which capital, that is to say, plants animals
and their product fabrics, will increase when
improved by the labor of man. The Chinese
recognized this fact six hundred years ago
when they fixed the limit of their production
taxes on manufactures at three and one-third per
cent; the grangers of to-day recognize it in de-
handing that the maximum rate at which our
national debt ought to be funded is 3.65
! per cent; while the estimates Of the growth of
| our national wealth contained in the various
decennial censuses, making due allowance for
what is added by the contributions of immi-
grants, prove that three per cent, or there
abouts, is still the utmost rate at which human
wealth can accumulate and is, therefore, the
utmost rate at which it is not improbable to
borrow
Whenever higher rate of interest than this
is paid for the use of capital there is risk, ex-
pense or bad management involved in the
negotiation, or all of these elements together.
In England and several other countries the
whole of the national debt is funded at
fraction over three per cent for par and that
there is plenty of capital to be had in this
country at or about the same rate, provided
the security is certain and the loan perpetual,
as is the case with British consols and the
other foreign securities referred to- is abun-
dainty evidenced by the fact that hundreds of
millions are now on deposit with savings
banks and private bankers at little more than
the rate mentioned, the difference being but
fair equivalent for the risk attending such
deposits as compared with investments in the
permanent securities of responsible govern
ments. The plan, too, which would induce
the man of small means to invest his savings
in go vernment securities would work a great
good, and make banking institutions more
careful than at present.
The time has now come when the circum-
stances of the nation imperatively demand the
recognition and practical adoption of this prin-
clp1e concerning the value of money, to the
necessities of the Treasury. Flagitiously
wasteful expenditures threaten, not only the
subversion of parties, but the solidarity of the
government itself; yet such is the greed of
ofice-holders and the lobby that in no direc-
ton does voluntary retrenchment offer, and |
such the subservient partisanship Of legisla-
tors that in no shape does forcible retrench-
ment dare assert itself. No economy seems
possible which threatens to curtail the power
or emoluments of those in office, and in this
dilemma saving of interest by funding the
public debt appears to be the only direction in
which, financial reform has any prospect of
success The necessity of such reform is but
too apparent. 1t only remains now to
indicate the specific measures requisite
for its accomplishment and to de-
monstrate their entire feasibility. The
measure which we propose u.s. that Con-
gress shall pass act authorizing the Treas
ury to issue four per cent gold annuities of
long date in exchange, at par for any of the
outstanding six or five per cent bonds that
may be voluntarily offered for conversion into
such annuities, or for currency at par in
which latter case the currency to be applied,
fast as received into the Treasury, to the pur-
chase and extinction of the outstanding bonds
as they become redeemable. There is little |
risk in predicting that in the event of the en-
actment of such measure, which would cost
nothing beyond the printing of the new Sc
curities, the whole bonded debt, consisting of |
six per cent fve-twenties, all of which are
now redeemable, would be funded at four per
cent within the current year and the remain
der as soon as the bonds which represent it
become redeemable.
The savings to the nation by this trans