French New Plan Of Financ...
The Times, 1824-04-14T00:00:00

Avwipblet has just been published in Paris, under the title of a LettfS to il l. de Villele, " Ol th nerew project for t7he reimbursement or rviiewtion of tJhe Paulic Annuitiet." This pamphlet is from the pen of the Count de 3Mosbouirg, who was Minister of Finance to Alurat when King of Naples. The author shows that acquaintance with the subject which might be expected from his previous func- tions d combats the new plan with such arguments, as are at once auites theprejudices of one portion of his countrymen, and the reasdredf another. To the former, he appeals against the influence of foreignz bankers; and to the latter, he endeavours to show, that the nev4 project of finance will entail great additional burdens on France, by adding nearly a third to the capital of her public debt, while it reduces the income of the French annuitant for the beneit of the English speculator. This subject of discussion is at present, as might be expected, extremely popular in France. In comparison with it, the septenniality of the Chamber, and all the otber announced projects of the Dlinis- ter, appear insignificant; and everybody who speaks on public topics, whether politician or not, is chiefiy occupied with the inquiry, whe- thier he is to lose a fifth of his income in favour of the emigrants, or, as the King of theernigrants expresses it,to healthe "last woounds of the revolution." The Count de losbourg, therefore, has found a willing audience, and his little work has created that kind of sensa- tion, in France which may justify us in briefly stating its outline. The ministerial plan has for its object to reduce the interest of the public debt to four per cent.,and this operation is to beaccomplished by creating a stock at three per cent., to be delivered at the rate of 73 per cent., either to the fundholder who may choose to accept of it in lieu of his present security, or to a company of bankers, whe, in exchange for it, may enable the Government to to pay oft'at par the refractory annuitant. By the comnplete success of the operation, it is evident, from the amount of the French debt, that the Treasury wiU be relieved from an annual charge of about i 28,000,000 of interest, (about 1,150,0001.), and the capital of the 'debt will be increased about 332 per cent. or 933,000,00, (37,320,0001.) Now, nobody can doubt, that if the French Govern- ment could reduce the interest of their debt from 5 to 4, without increasing its capital, as we have done with respect to our 4 per cents. into 3 I stock, it would be both wise and just to do so; but the first part of the measure becomes more questionable when neces,arily connected with the second, It would be equally wise to create this increase for the former object, if the annuities were to be perpetual, and no idea was entertained of reducing the principal: but if the French are to employ their sinking-furnd to reduce the capital of their debt, this increase of that capital may be sufficient to counterbalance the advantage resulting from the diminution of interest. If the new rentes at three per cent. be issued at 75, every advance beyond thflt rate will be so mnuch paid by the sinking fund towards the redemption of the 933 millions of additional capital created by the new plan. If from 75 the three per cents. rise to 95, the sinking fund, if employed at all, must be employed at a loss of 20 per cent. The Frencis sinking fund is stated to be about 72 millions. or nearly three millions sterling. The loss of 20 per cent. on 3,000,0001. is 600,0001. If the sum appropriated to the redemption of debt weTe more consi- derable, the loss, of course, would be greater; and if 6,000.0001. were so employed, the annual loss to the sinking fund, (or 20 per cent. upon 6,000,000=1,200,0001.) would be about equal to the annual saving from the reduction of interest. Thus the funfiholder would be a loser to the amount of a fifth part of his income, by the reduction of his annuity; and the nation would be a loser to the amount of more than thirty millions sterling by the creation of new capital issued at a low price, and redeemable at or near par. The 28 millions saved in interest would thus, in other words, be absorbed by the higher price of redeeming the capital, and the difference would go into the pockets of jobbers and speculators, without bene- fiting the people. If we consider the 3.3 of additional stock, as a bonus for the acceptance of four instead of five per cent. the mode in which that bonus operates against the state, when clearing away its incumbrances, ought to be considered. If the debt was to be paid offin 33 years, this increase of capital would impose an addi- tional payment of one per cent.; if in 11 years, of 3 per cent.; if in five years and a half, of i; per cent.; and if in three years, of 10 per cent. Thus the charge of 4 per cent., at which the Minister fixes the rate of interest for the annuitant, might, with the addition of ihe above repurchase, be respectively stated at 5, at 7, at 10, or even at 15 per cent., according to the rate at which this premium of conversion was paid to the speculator. But it may be said that the creditorsof the state, or the fundholders, need not permit the interference of)pecultators, by voluntarily accept- ing the reduced rate of interest. To tris the Count de Mosbouirg replies, that he dIoes not object to a reduction of interest, if there was no conmbination between the Winistry and the great speculators to compel the reduction, or, in other words, to pay off a debt which must be re-invested on the terms of the Mlinisters and the bankers. " I am persuaded," says he, " that it would be as contrary to justice and good taith, to demand all at once a reduction of interest on a debt of nearly 3,000 millions on pain of imniediate reimbursement, as it is csntrary to the interests of the state to obtain this reduction by an increase of 331 per cent. on the same capital." But it would be of little moment to have pointed out these ohjections to Mr. de Villele's plan-objections whiclh, by the way, are obvious enough- if the author had not given some value to his opinion by producing a plan of his own as a substitute for that of which he disapproves. Agreeing with the rest of the world, that the state has a right to pay off its debt at par, he thinks that a reduction of interest might be effected by a prudent M1inister, without looking for aid beyond the e'isposable resources of the sinking find, or creating as a bonus to the fundholder addidonal capital against the nation. If the sinking fund were to redeem the debt at par, itl amount (being 72 miUions) would in the course of 20 years more than redeem the whole sum of 140 miillions. But if the sanse ftnd continued its purchases in the usual way, after the debt had risen above par, it is plain that its ope- ration would be crippled to the extent of the excess. Thus, if it should purchase at 125 what it might redeem at 100, it would lose 2f5 per cent. of its effective value, and would probably push up the price of the rceitee which remained unredeemed to 150 or 200. The state would tbus be in the situation of a person bidding against himself at a public auction; it would be augmenting the mass of its debts by its own operatiens, and would be the less relieved the more it advanced. Besides, bycontinuing to reparchase its own debt above par, would ap- pear a surrender of its right to redeem at par. OR these principles our author constructs his financial plan. In the first place, he would have the sinking find to stop its purchases when the price of sentes exceededl I00. In the second place, he proposes that the sinking fund shall be left to accumulate by being lent at compound interest, aided by any surplus of revenue till it arose to lO0 millions. A repayment of the debt to that amount should then be announced three months beforehand, and that repayment should take place by series in an order decided by lot. Arrangements would then be made for allow. ing the fundholder to choose between a repayment of his capital at par, or a reduction of his interest. Such fundholders as preferred the latter might obtain a guarantee against repayment for six years. All the rentes redeemed would belong to the sinking fund, and serve with its other dotations for new purchases, or new repayments. The total amount of the reductions to which the public creditor should consent would be cxtinguished, to the relief of the Treasurv and the reduction of direct taxes. Such is tke project of M. de Mosbourg, which it niust beconfessed is not without some Plausibility. The great practical difficulty which would attend its execution is the fornation of what he calls his series of repayment by lot. If this difficulty could be conquered, the proposition would deserve some attention. It would at least avoid one evil-the creation, in time of peace, of nearly forty nillion sterling of new stock, and all the gambling, expense, and jobbing of a great finance speculation. The French funds, be it re- membered, have only a very short time ago reached par. They are in the same situation as our five per cents. were about three years ago. lVhatwould then have been thouglitof our Finance Ainister, if, instead of reducing these fives to fours, he had converted them into 3 per cents., by creating about 33 millions of new capital debt ? Or what would be our opinion of the present Chancellor of the Ex- chrquer,if, about t,vomonths ago, lie had brought forward aplan in his budget to coivert the 4 per cents. into two, bynearly doubling the no- minal debt, which might afterwardsbc paid offat par? So long as ulti. mate repayment ot the capital is not contemplated, the rate of an- nuity is the only subject worth it moment's attention; but to increse the principal, in order to reduce the interest, while we intend to redeem the forner-to maintain a sinking-fund with one hand, while we wantonily add to our debt with the other-seems tbe great- est of practical absurdities. . /ItPENCH NEW PLAN OF FINANCE.