New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1882-09-19
HOW TO USE THE SURPLUS.

HOW TO USE THE SURPLUS.
Many business men are now urging that Sec
rotary Foger should buy bonds. They mann
tain that this mode of discussing the surplus
is more prompt, more efficient, and i'll the end
far more to the advantage OF the Treasury,
than any other. In this respect they are com
ing to the belief that the earnest advice oil
The TRIBUNE. prior to and at the time MI.
Folger entered upon his present Office was
much more worthy of his attention than 1t was
then supposed to be. either by them or by him.
The Secretary determined that it was wiser to
call bonds, which can be paid ut par, than to
nav a high premium for the eXtingulshment OF
yearly burden for twenty-five years TO come.
II is no disparagement to him to suppose that
his Judgment was largely influenced by the
belief that it would he unpopular to pay high
premium for bonds. Yet it has not been and
ought never to be the policy of the Republican
partv to assume that the people are incapable
of appreciating any step that IS truly wise ana
worthy. Perhaps, us the practical objections
10 the use of the surplus exclusively in calling
bonds have now been realized, 1t may seem
wise to try "a different course.
There is really 10 room for dispute as to
the comparative advantages of the two
courses to the Government nor do We believe
that the people can be incapable of apprcci-
ating them. The four per cent bond runs for
twenty-five years therefore, 20 per
cent more will be paid in that time
upon such bond than upon three per
cent. Calls for bonds, if continued, must soon
begin upon the per cents. Notice that the Gov
ernment would purchase rather than call bonds,
if It could get them at n reasonable price,
would hasten the exchange to 3 per cents II
the Government has its choice, to buy per
cent 81 900 bond for 81 200, and to pay IN
forest amounting TO $3.50 in twenty-five years
ON a 3 per cent bond, or to call i'll the ,
per cent bond, paying par for 1t, ana to pay
81 goo in interest in twenty-five years on a
1 per cent bond, there is hardly a schOol-bOy
who cannot see that the Treasury would gain
$50. or 3 per cent, by buying the long bond.
On a debt of $500, 100000 this would save
S15. coo. 900, but the incidental advantages
would be Incidentally more important. The
Government could better afford to pay 4 per
cent interest on debt which il could redeem
at any time than to pay only per cent on Il
debit not redeemable for quarter of CEN
| tury.
The practical difficulties which business men
are now compelled to realize, though they
were pointed out more than year ago by
THE TRBrNE. were not ~ first fully apprccl-
ated. The present monetary situation illustrates
them we'll The Treasury has surplus, or
dinarily exceeding 100000 900 per month, to
he extended in payment of debt. The ac-
emulation of as much as $lO,0OO,O0O for
| he
money market at this season to undesirable
pressure. Let it he understood that it is not
the speculative fraternity that suffers, but the
most legitimate commercial business and the
most solid enterprises, from policy which
unavoidably makes money unnaturally easy
for one week, and then unnaturally tight for
| three weeks following. But this cannot be
prevented if the Secretary persists in calls of
l&lO. OOO. 900 or 81 100000 each month. In
! one form or another the amount OF money IN
| tue Treasury just before the maturity OF call
mnst be greater by several millions and the
amount in the banks consequently less by sew
erAl millions, than will he held shortly after
! the maturity OF such call. The experiment
was also tried of issuing three separate calls
for Nav Of $j,OO0,000 each, but this was
fonnd to Involve such practical Disadvantages
| that the Secretary has not tried it again.
| A radical objection to the plan OF relying
unon calls alone il that the Secretary oIght
not 70 slop interest on bonds without at least
two months notice, and yet he cannot know
accurately how much surplus revenue he Will
have to expend two months in adj
vance. At this very time, though the
money market is in such shape that
6Io per cent is paid on much commercial
paper, the Treasury has no call that will ma
! lure in September or October, except one for
a little fragment of S;3,500,OO0, and cannot
now get out any money to speak of by that
process iii less than sixty days, unless it makes
a large call and then anticipates payment
without rebate for an unusual time. his
would hardly be n popular thing to do 1t
would give a great advantage Ia operators at
"A few monetary centres, inasmuch rs they
could get double interest on their money,
while holders at "A distance from such centres
have not time to get news of the Arrangement.
and then to send Oh their bonds and get
their money, and aiterward to make other
use of it for any considerable period. Nor
can the Treasury ever know what part OF the
bonds covered by any call will be offered for
REDEMPTION. Out OF $4,000, 900 called for the