Litchfield enquirer., 1881-01-13
Refunding.

There is no subject upon which mehsof in-
 teiligence speak with 50 much diffidenceas f.
 nance. Ifisa problem inz which most of the quantitiesare unknown; the ratios, ever vary.
 ing; and the best answer, guess. We have read with much iaferest the debates in Con gress for the past week upon the various pro- jects fer refunding that part of the National debt which will fall due during the coming year, amounting to a little less than seven hundred millions, Qt thisaamonnt ,about-a. third now bears six per cent interest the re- mainder, i've. The Committee of Ways and Means have proposed to- refund this amount in three per cent bond payable at govern ment option m 20 years. There are two ob 3ectioaesa both very serious, to this biTf More than half of the bonds coming due are held by the national banks and deposited as security fr their circulation. They have ts pay high government taxes; and, unless there is either remission of tax or bond bearing higher rate of interest issued. many of them will give np their circulation and wind up, or ex- ist only as banks of discount. This would in- evitably produce sharp contraction of the currency, with danger of another panic on the one hand; and make it doubtful, on the other. whether the three per cent loan could find takers at par. !..s.
 There is another grave objection to the pro- posed three per cent loan. Aside from the TOO millions to be refunded. this year. there are outstanding 250 millions of 4 per cents, due in 1891 and about TAO millions of per cents, not due till 1907. These practically constitute the entire interest bearing national d ,bt. We are now paying of this debt at about the rate of 65 millions year, and there is surplus in the treasury sufficient. with the present rate of income. to pay off the entire 700 millions proposed to be refunded in about 10years. This would bring US to the 250 mil lions of A per cents which would become due in 'g1; and we should then have to wait 16 years before we could pay our 4 per cents ex. cept by buying them at premium in the mar ket, Should the 3 per cent bill pass. it would practically put the entire debt out of.our reach for twenty years. save the 250 millions of 4 per cents, which do not become due till '91.
 It is this latter objection -that of placing our debt out of reach of payment for 80 long term of years-that creates great, and we think, very just opposition to the bill in the House It ought to defeat the measure. It would seem vastly wiser economy for the government to refund the amount coming due at 8, or even at per cent, with the opportu- nity of paying whenever it has the: funds, at par, than to be compelled to buy in it's and i per cents at premium which will practi- cally neutralize all the advantage of the low annual rate paid How considerable thls pre- mum may become is evidenced by the fact that it is now over 12 per cent upon the per cent bonds.
 There is another question involved in this discussion which strikes us as impossible of answer at present. Is the rate of interest on perfectly safe securities likely to remain at 5 per cent. or possibly at per cent? Will not the revival of business necessarily increase the interest producing power of capital? Many able financiers think SO and they believe that the present high premium on the four per cents is due not to their intrinsic value, but to the fact that careful investors are unduly timid regarding business investments, and to the necessity there is on the national banks of obtaining national bonds at any price, to en- able them to obtain from the government the privilege of circulating their bills. as.