New-York tribune., 1880-01-12
WHY NOT THREE PER CENTS
A STRIKING SUGGESTION.
WITH SOME FoRCIBLE ARGUMENTsfRoM BUSINESS
MAN OF THE HIGHEST AUTHORITY.
To the EditOr OF The Trl6une

SIR: Ihere are TO mature Wltnin Il I'W ulOHlHo
something over seven hundred and fifty millions of
bonds, beal FIVE and six per cent interest per an
mum, and the question is being yehemeutly dis
cussed as to whether the Government shall
attempt to convert them into four per
cent loan or one at three and half The dispute
Is made to turn upon the practical business point
whether a three-and-a-half per cent loan Will be
taken at par; there being 40 doubt about th" four
per cents bringing that rate, as the outsiandlng
fours are quoted at considerable pre-
MUM. Naturally the bankers and brokers
who have the handling of these loans, prefer the
higher rate, and are striving TO impress their view,
which is that of the lending party, upon Congress
which represents the borrowing party This is not,
as some of the former class would make it appear.
merely a simple matter of ascertainiug the market
rates for money, or OF the amount OIL
surplus capital held for Investment by Institutions
and others. There two other elements nt'-
mately concerned in the determination of this
po,nt; (l) the policy adopted by the Government
as to the rates it Will pay for the or forbcarance
Of money; and l2l the length OF time for which 1t
will borrow at fixed rate of interest.
The last of these elements il purely mathemat-
ical calculation, easily settled, while the former
enters into the broad field OF National credit, abil-
ty good faith resources, willingness TO bear bur
dens. etc 1t ought to he the opinion OF
every American. as it is coming To he
that of enlightened Europeans, that IN all the
elements which 90 to make mp good credit,
the United states has no superior upon the earth.
The recent speech Of John Bright to his Engilsh
friends reveals how much this idea is beginning to
take hold Of foreigners. Holland borrows, by rca-
son of her exceptional thrift and political Guaran-
tees at less than three per cent England borrows at
three per cent. Why should the United States
offer to pay one-hrd more interest than either OF
these nations. In the cAp7nse and productive
ness of our soil, our mines forests, fisheries,
IN the ingenuity and intelligence ot our
people. in the inherent love of law and
Justice and the willingness 70 bear what
ever burden of taxation may be necessary Tor
National uurposrs we offer undoubtod guarantees
to capital Now that We are at peace, aud without
any mcnaciug ncighhor, or large standing
Army 10 menace them; when We are
under DO stress for money. why should
the Government voluntarily drprcciat' its own
credit by offering th" HIGHER instead OF the
lower rate OF iu,crc.t2 The fixing Of the rate
% viii pas beug . large clement not only IN
TIE interest pad bv The Nation. but also in
iac railing rates TO be paid b, the people among
themselves. good policy dictates that the lowest
working rae ehould be adopted. rather than
"a higher one WHY not. therefore, try
three per cent lo.n II j. a little strange
iu All this debate that no one has seen through 1t,
that tlc Government is NOT pinned mp 10 One or
othero these two arbitrary rates but may take adj
vantage of any degree between thrm. and may very
Ekoly succeed ai q rate lower even than Urcc-aad-
a-hau.
Bat some ono VIII object that 'Lr'c per cent
loan c,auot Dor marketed at pIr. Tbs is pure
assumption. cItrer wav; hut ii the Government
SAYS, in advance. That D, "il pny four
.,uroliyu 10 cannot borrow 90 three. VIXEN wc cou-
si1er 3D., czc.pnon from taxation. eqnyl-
lent 10 about tao pen cont, taer' me good
reasons for believing if 10 could not borrow "at-
=. -at. d could so manage as pay b't 3 per c'''
fr it, loans. But supuo-e it cau.ot; what fol-
lovs3 There lis somo rate. .me decimal between
aad 4 at vhch it can borrow. At thc present
maIset ratios tLc old bonds show that !, need LOT
uay : por cent.
H. ~ Durs Of 1907. % 103, yield 3.S2 rer ccat.
L. s. f,urs aud half Of 1881, go 100. yield 30l
per cent.
H. =. fycs Of 1881. nt lo2i. yield 3.lG per cont.
L. $. sixc. C~y.l nt 12O. ylrd t.26 per cent.
# tlc latter were an mdoub,cd gold bond they
wou'd surely be carried below foar What
o., there about par y.lac ;iai Is so especially bind
ing and sacred? 8 t.lsc p,r cent bond sold 800
discount may Doe uo m.ie ouerou- than four
per cent one ~ par But in fct the term OF
rate. VIII shoad we keep turning these
loau, over aud over fist into one shape and then
suothori Il is reproach that we have SO many
kind of loans boring different rates. and matur-
ing different dltcs. IN j. co fu-.ug, aud Inurc'
10 nobody's benefit. unless 10 be the brokers, Who
get q shaving Of profit out Of the ignorance OF
their customers.
The present is favorable time 20 BRING some
sort of uniformity aud simplicity into the public
debit and tor,duc. thc rate Il interest to ih" lowest
point whether taat be- three per cent. four. or a
decimal between the two. This can be done by a'i-
tho. lin. general consolidated three per cent loan.
into which all other loans should he funded as
fast %, rrlcucahlr similar IA ilud 10 thc
English ,ol-o'- arl French rcutct. L. B. lot ucr's-
-ar, that ,h. should be sold 20, PIl though ih'tr
ere many Ioa.ol- Why 10 may br. lt =. suihoic"i
that thr sales, and conversions Hr made on
the best attalnablc torms. 10 hc com-
p.ctc success it should not b, m1de r.
dcemable at any fixed time, but lun
until 70 Was bought mp ln open market by the Coy
crnneut. This would transfer the option OF r.
dcmrtiol (which is virtually barren privilege as
all our great loans are not paid Of but simply re-
n,wcd to the public which could then mold the
bonds ~ long as they liked. Now. The length Of an
investment L. an important feature wI,h trast funds
and dducary institutions for which long loans are
preferable.
throc per cent bond .or stock would be the more
appropriate term for IN irrcdecmnble debenturel
if bought at 0j.7l and held for - years. yields
34 per cents il bought at 9l.SO and held for 30
years. yields 3l4 per cent If bought at SV.oG and
held for 80 years. yields gig per cent II bought at
1913 and held for 30 years, yields 33l per cent
or conversely, the Government pays but tnee
and half por cent interest per annum.
if 1t sells its three per cent consols at
81. -, and they remain ont 20 years; at 9O.IG
if they remain out % years at 0O7d, II they
remain ont 30 years; at s99G, If they re-
main ont 80 years at SS.23 If they remain out
IL. ll..,-. .tlf lna