Year: 1870

1t is constantly insisted, by men
who form and discuss projects for
funding the public debt, that our Gov
eminent ought not to pay any higher
rate for loans than other governments;
and that, since Great Britain bOrroWs
money at little more than three per
cent, and France at four and hail
per cent, good management viii
bringOur bonds down to the same rate.
But these nations borrowed as cheap
ly fifteen years ago as they do now
Our national credit was as good then
as that of either of them, and was
certainly better than it ever has been
at any other time. Why, then, were
the United States unable to borrow at
the same interest paid by them? Ihe
credit of the French rentes IS as good
at home as that of the British consolsi
the debt is held by far more OF the
French people than Of the British, so
that it is more truly national inter
est with them, and is quite independ-
ent of the form of Government
Why, then, does France pay half as
much more as England does for the
use of money.


The answer to these questions is
plain. The rate of interest in any
country does not depend alone on the
credit of the particular security offer
ed. A controlling element in the
problem is the natural value OF the
use of money in that country and this
depends entirely on the average prof
its of capital there. Capital Is more
fruitful in the United States than in
any other great nation; and the rate
of interest is therefore, naturally
and necessarily higher here. The
use of money is actually worth more
in London than in Amsterdam IN
New York than in London in Ill1-
nois than in New York, and in Cali
fOrnia than in Illinois; and, so long as
this is the case, the rate paid for its use
will vary in these places accordingly ly.
The credit of the city government OF
San Francisco is not less than that of
New York; yet, for many years, the
former has scarcely been able to obtain
on ten per cent. loans a small fraction
of the amounts which the latter easily
borrowed at six.


1t is true that growth of internatiOn-
al trade and exchanges tends, to some
extent, to equalize the rates of inter-
est. But capital is proverbially con-
/
and timid of transfer. The great mar
ket opened of late years for the bonds
of the United States among the saving
people of Europe, will greatly help
our ability to borrow, if all who have
bought them are fairly and wisely
l treated. But the help will come
slowly. They buy our bonds only be-
cause the interest they receive on
them is immensely greater than at
home and even then they buy them
sparingly and with hesitation. If the
difference in interest is reduced, part
of the motive to buy is taken away |;
and unless this loss is made up by an


increased sense of security, the mar


ket will be destroyed.


At best, there is no reason whatever


to suppose that the United States viii


be able to fund its debt at the same


rates paid by the nations of Europe,


in which the oldest and largest aeeu-


mutations of capital are seeking in


vestment. It would be the surest


symptom Of decline in the rate of


our national growth, if money could


find no investment here at a more


productive rate than in these coun-


tries. Nor would the widest market


one nation ever offered for the debt


of another be sufficient to reduce the


rates of interest upon it to point


near the lowest rates paid by the


purchasing nation for its own. If


London capital buys consOls at three
per cent, instead of crossing the


channel to buy equally secure rentes
at four and half, it would be folly to


expect it to cross the Atlantic Ocean


to buy our bonds at the latter rate.
Let such delusive expectations,


then, be done away. Let no one eX-


pect impossibilities. Let no useless


and injurious efforts be made to force


upon capitalists securities for which


there can not be a market. With


economy in the Government, and an
honest collection of its revenues, its


credit may well rise to the highest


point it has ever enjoyed; and there
seems to be no reason why President
Grants administration may not yet
see the national bonds accepted every
where as an absolute security, unsur-
passed in the world, and their pledge
of five per cent. interest again in de-


mand, at par in gold. If the Govern
ment sets this high aim resOlutely
before it, and succeeds in its accom-
plishment, it will have wrought the
greatest work ever attempted by
financial craftsmanship. But It is
honest work, patient and faithful at
tention to every detail of the problem,
and not any mysterious jugglery with
the form Of bonds, or legerdemain in
the mode of their negotiation, that
can contribute anything to success.