The Minneapolis journal., 1903-03-31
Refunding Operations.

.
satisfied with the prospect Of ready
compliance with his offer to refund the
1 per cent bonds maturing in 1907 and Is
sued under the aot Of July IA, 1870, and
the 3 per cents issued In 1898, at two
per cent. The holders OF such bonds to
the extent Of $100. 900, 600 will receive an
income Of ~ per cent from the invest
ment and have the advantage Of a lower
tax on the new bonds than the old bonds
were subjected to, SO they will be desir-
able for use by the national banks as Sc.
curity for circulation. The holders Of
the old bonds will receive checks for the
difference between their present worth
and their par value, with accrued Inter-
est up to April 1. The payments to be
made will put in circulation from $5,000,-
900 to s1o,OOOOOo. which will be Of use
when the money market experiences the
usual stringency in the autumn. The rate
in refunding operations, two per cent, has
been the official figure since the difficulty
which was experienced in 1891, in the
attempt to refund the 31z per cent bonds
at the low rate Of 11k per cent, the banks
ISluSiliE ~ cAC1lGiASS IIIcll JULIUS AOA 1888
than two per cent.
The government has found that it is
more profitable to carry on refunding
operations by circulars than to hand over
to syndicates such work, and Secretary
Shaw estimates that the government un-
der the present operations, will obtain
a profit Of $2,ooo,ooo to s3,OOO,Ooo, which
{e, 1,o u.
for cash to redeem the old bonds as was
formerly done, and hold the money re-
ceived in the treasury until the maturity
of the latter. During the last thirty years
the refunding operations of the United
States have been of vast magnitude, step
by step reducing the interest on the pub
lie debt until it will not be long before
the entire bonded debt will be refunded
at 2 per cent. 1t is interesting to recall
that, under the Dec. II, 1860
treasury notes were issued to the amount
of s10,01o,OOO, of which about 5000, 900
bore interest at II per cent. The, first
war loan Of Feb. g. 1861. Of SIS, All, ,OO0
having twenty years to run at six per
cent interest, could only be negotiated
at a discount OF ,O19,776.1O, or at an
average rate of $S903 per hundred dollars.
{ When the fve-twenties of 1852 became
+ redeemable, the question of refunding
them at lower rate of interest was dis
cussed, but nothing, was done In 1870
the bill authorizing the refunding and
consolidation of the national debt was
adopted the act to strengthen the public
credit having been passed the previous
year, giving assurance that principal and
interest Of the public debt would be paid
in coin. . 1-"'"
Under the refunding operations the an
nual charge Of interest was reduced from
and per cent to AZ and percent, and
the average payment a year by about
$2o, ,oO0, 900.
The later refundins, operations have
been on a large scale. The credit Of our
country stands very high While English
5sconsols have been quoted below 80 with
in the past few days, and German threes
are quoted about 81. and French threes
a little under 100, and Russ1a's -fours at
lo2, our two per cent bonds maturing
IN 1880 are quoted at 107 to los, and the
Z fours Of 1925 at 1877 to 1873. The condi-
tions in national wealth, Industrial and
commercial enterprise increasing popula-
tion and splendid record of fidelity to the
national financial honor, enable us to bor-
row money on easier terms than any
other nation. Alexander Hami1ton's fun
damental maxim: 1.-THE creation of debt
should always be accompanied with the
means of extinguishment," is unquestion-
ably the secret of high national public
credit.