The New York herald., 1879-12-09
Mr.. Woods Plan to Save the Federal
Treasury Two Hundred Millions.
THREE PER CENTS WILL SELL.
Popular Demand for Safe Investment at
Low Rate of interest.
HOUSE OF REPRESENTATIVES,, |
WASHINGTON. Dec. s, 1879.


me in the folio wing lines -
"Mr. Woods bill strikes not as a measure tor
the promotion, but for the obstruction OF refund
ing 1t forbds the payment OF more than 31a
per cent interest on any bonds hereafter issued
by the government 1t III not probable that such
bonds could be sold to any such extent is neces
sary within the ensuing two years. and the effect OF
the passage of Mr.. Woods bill would be simply to
arrest retunding and prevent reduction Of the pres
ent high rates of interest"
Permit in reply to avail myself Of your col
umns to defend my position and to show that the
rate of interest proposed by me-viz.. "a per cent
is sufficient to enable such bonds to be negotiated at
par II am correct in this tho difference between
per cent interest and 31s per cent on $S0O.0O0O0O
for fifty years. ggested will aggregate saving
of S200.000000 for the period that the bonds will
have to run, relief to the tax-burdened
people Of this otherwise prosperous and happy
country. It may be wol, however to state that the
bill presented by mois intended to apply only to the
balance of the $780, 1000 already authorized to
under the of 1869 and 1870 and not to
the future maturing bonds amounting to $7S2 700
coming due in 1880 and 1881. am preparing bill
for that purpose. which will be presented and re-
ferred within few days. The question at issue.
however. remains the same in that bill shall
propose also limit the interest s1s per cent.
TERMS Low RATES.
Though the length OF this communication requires
apology yet that the gravity and supreme
Importance of the subject will justify it, have
therefore gone the question somewhat in detail.
not only justification of the lower interest bear
ing bond proposed but also to explain other provi
sious which shall incorporate in my bill. The
per cent bonds OF the government have within day
or twos sold ut premium equal to per cent. ex-
elusive OF the accrued interest. At 103.SS they
would pay just So per cent per annum for the
time they have to run, in other words.
at premium Of S7s per cent they would
be the equivalent of 3a per cent bond at par
having twenty eight years to rum The premium ut
which they now selling has been reached in the
of tho increasing activity in business through
out the country, the activity in the money market
and the high rates for money for business uses In
cident tho movement of the crops in the fall OF
year and the increase in values ut tue
Stock Exchange and in commodities generally. aud
the existing possibility that the government may
again become u seller of per cent bonds at par.
With the returning ease in money which invarisoty
follows the crop movement. and the lighter demand
and lower rates which prevail through the succeed
ing and greater portion of each year. and with the
possibility of further Issue of per cent bonds
| by the government removed. there is little
| doubt that the per cent bonds would
| quickly advance to premium at which they would
| not yield much if anything over BIZ per cent per
annum the investment. aud thus establish par as
the value of 31a per cent bond OF the United
States having twenty-cight years to rum Giving to
| q 3ls per cent funaing loan longer period to
II
value which would render it the equivalent ut par
of per cent bond having only twenty eight years
to run ut premium OF from to ~ per cent which
| may be illustrated follows. viz -
| per cent bond having twenty-eight years
to run @ ay sears
will pay 3a per cent per annum at. t......... LOG IL
Difference in value to pay 81 per cens.....- 81 Ss
per cent bond having twenty-eight years
to will pay per cent per annum at. ..s118 IS
| A 81 per cent bond having nifty years to run
| will pay per cent per annum at........... l12 81
Difference in value to pay per cent. ...... So "a
the difference in value diminishing the premium
increases and as the time the bonds nave to run is
shortened In other words the additional length of
life given to the new bond bearing the lower rate OF
interest increases its relative value the premiu
ito be distributed the life OF the bond in deter
mining it's value for investment) inc reases and
tie maturity of the shorter bond approaches. until
in fifteen years from this time their relative value
as u per cent Investment would be nearly equal,
thus:--
| A 4 per cent bond having thirteen years
to will pay per cent per annum at sl10 70
| A 81 per cent bond having thrty-fve
| years to run will pay per cent per annum
and in twenty years from this time the 81 per
| cent bond would be worth the most as 3 per cent
A par cent bond having eight years to
run will pay per cent per annum at. s1o7 OF
| -, per cent hond having thirty years to
will pay per cent per annum at...... 100 IS
| From the foregoing illustrations it is apparent
readily at par. with the present per cents at a
| premium which they are certain to reach
Il is definitely determined that the goprrnment issue
bonds bearing higher rate Of than ga
! per cent.
The British consos bearing per cent interest
| selling in London at nearly par. As has already
been shown above United States bond. bearing 3G
per aud having fifty years to rum would pay
| per cent per annum at $l12 81, and the present
per cent bonds having twenty-eight years
1t cannot be questioned that tho credii
of the United States government is fully
equal to that of Great Britain. OF other nation
in the world aud in this respect there is
why the United states should hereafter pay higher
rate interest its public debt than that paid by
| the favored borrower among the nations.
The only difference in favor of Great Britain
pared with the United States IN in the
u larger aggregate of accumulated and inherited
wealth hands of those who live upon their
comes without business or occupation which will
| not encounter the risks or business at any price.
and must consequently be safely invested ut
low ratio Of interest in the public funds
This class OF capital Is however, rapidly accumulat
ing this country. and it is believed has already
reached proportions sufficient to absorb carry
tho entire debt OF tho government ut low rate of
| interest, whatever may be the demand for or the
value of money Tor business purposes for which the
class OF capital referred to is not available. Tho
difference above referred TO in of Great Britain
u considerable extent Offset moreover, by the
fact that British consols seldom bought outside
OF British territory, wue tho bonds OF the United
States favorably known and invested In to a
greater less extent in every civilized country
PURCHASING MATURING bonds.
Legislation providing for the funding of the out
In the present condition the public Treasury, pro-
ceed on the theory that the funding bonds bearing
lower rate of interest must bo sold before con-
currently with, the purchase redemption OF the
outstanding bonds bearing the higher rates of in
terest. The government can now afford to reverse
tho operation by using portion of the money now
In the Treasury for the purchase redemption OF s
le sale Of bonds beatng ocer rate OF interest This
process would
|. Create vacuum in the investment market;
turn aloat large amount of capital, which must
seek reinvestnent in government bonds and thereby
mako market for the rcfunding bonds, which
would soon begin to demand and absorb u 81,
per cent bond at par.
.. 1t would temporarily utilize and save interest
on portion Of the money lying idle in the
Treasury. without permanently diverting it from
other purposes Tor which IL may at any time here
after bo required.
.. 1t would meet the views of those who think so
large AN amount of money ought not to remain idle
in the Treasury vaults while the government is
paying interest on nearly two thousand millions.
lla LLAMA Aad4l lurlil