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expression is perhaps the more correct not make any essential difference in of the two, provided the word fund the principle of the transaction, as I be applied, not to the securities them- have already explained it, though it selves, but to the taxes or revenue out gives rise to a division of the public of which the interest of these securi- debt into funded and unfunded. The ţies is paid. It was formerly the prac- funded debt is composed of the various tice with government, in negotiating kinds of stock mentioned above, of a loan, to set apart certain taxes for which the public creditor cannot dethe payment of the interest of that mand repayment, but for which he is loan; and the taxes thus set apart entitled to a certain annual interest, were considered as a separate fund, according to the sum placed to his distinguished by a particular namé credit with the Bank of England. The according to the rate of interest, and unfunded debt consists of certain bills the particular purpose for which that issued by government to such as will loan had been raised. As the loans advance money upon them, and of were multiplied, however, the num- which the holder is entitled to de ber of funds necessarily created con- mand repayment at a certain period. fusion; and to remedy this, a great These are chiefly Exchequer Bills, proportion of those bearing the same Navy Bills, and Ordnance Bills or Des interest were consolidated or thrown bentures. They are issued for the into one general fund. Hence the purpose of supplying the place of taxes terms 3 per cent. and 4 per cent. con- that have not been forthcoming, or to solidated funds, which are usually meet contingercics for which no procontracted into 3 per cent. and 4 per vision had been made, and receive cent. consols.' About the year 1757, their names from the particular serthe public creditors, who held certain yice to which they are applied. Ingovernment securities bearing interest stead of being paid off when they fall at 4 per cent., received from govern- due, the holders sometimes receive ment their choice either to have their their value in stock; and the bills are capital paid up, or to reduce their in- then said to be funded, or they conterest from 4 to 3 per cent. The lat- stitute a part of the permanent debt. ter being accepted, the fund has since I have already observed, that when been denominated the 3 per cent. re- government borrows money on the 3 duced, and is generally written 3 per per cent. fund, the lender receives an çent. red. The two funds, 3 per cent. acknowledgement or credit in the pubconsols and 3 per cent. red., have ac- lic accounts, to the amount of £100 cumulated so as to comprehend the for every £60 Sterling advanced. In greater part of the national debt; or, some cases he receives credit even for in other words, a great proportion of more, but seldom less. Now, though the taxes is divided into two funds, to him it is only 5 per cent. on the out of which is paid the interest of al money lent, because the interest of most all the loans that have been con- £100, at 3 per cent., is just equal to tracted for many years past. The in- the interest of £60 at 5 per cent., still terest of both funds is of course the it may appear strange, perhaps, to same, but that of the consols is paya- some of your resders, that governble on the 5th January and 5th July, ment should grant an acknowledgeand the reduced on the 5th March ment for a greater sum'than it actualand 10th October.

ly receives, or that it should borrow When government raises a sum of nominally at 3 per cent., when it is money by loan, and the interest of actually paying nearly 5, or even upthat sum is charged on the permanent wards of 5. This will appear more taxes, the sum itself becomes a part strange still when it is considered, that of the permanent national debt; and if government 'ever proposes to pay off in this case, the lender, instead of ac- the national debt, it must pay not the tually receiving a bill or acknowledge- sums received, but the full amount of ment for the money advanced, as I the nominal capital for which the have hitherto supposed, is simply en- stockholder has received credit in the tered in the books of the Bank of Eng- public accounts-that is, £100 at least Land as a public creditor, and when he tor every £60 that has been borrowed sells his stock, it is transferred from in the 3 per cent. funds. The only his name to that of the person who explanation that can be given of this purchases it. This, however, does plan of borrowing, must be on the supposition that it is not in the con- by its true value, the price at which templation of government ever directly the purchaser has 5 per cent. for his to pay off the national debt, and that money), the 3 per cents are higher in its object, therefore, is to borrow on proportion than the 4 per cents., and the lowest interest possible. Now, the the 4 per cents. than the 5 per cents. plan that has been adopted will cer. Thus, on a late occasion, when the 3 tainly enable it to do so, better than per cents. were at 75, the 4 per cents. paying on the sum borrowed such an were at 93, and the 5 per cents, at 106 ; interest as the lender would be willing whereas had the two last risen in the to accept. It was formerly shewn same proportion with the 3 per cents. that, in time of peace, or when the a- according to their respective interests, mount of government securities ceases the 4 per cents. would have been at to accumulate, while the demand for 100, and the 5 per cents. at 123. The them increases, the price of stock may, latter, indeed, would seldom or ever and does actually, rise higher than rise above par were it not understood; what it cost the original lender. This or rather had it not been at different will take place on all kinds of stock, times enacted, that the holders of this but in a greater degree on 4 per cents. stock should not be obliged to take than 5 per cents., and on 3 per cents. payment of their capital till such time than 4 per cents. Though govern- as a certain quantity of the other ment cannot oblige the public creditor kinds of stock be paid off. to take less, in payment of his capital, When a loan is negotiated, the puba than £100 Sterling for £100 stock, it lic creditor sometimes receives his secan at all times oblige him to take curities all in one sort of stock or that sum, whatever the nature of his fund. Thus, in 1808, when eight stock may be. Whenever stock, there- millions were raised by loan, the lenfore, reaches par that is, whenever der had assigned to him £118:3:8 £100 of any sort of stock rises in the of 4 per cent. stock, for every £100 market to £100 Sterling, a stop is ne- Sterling that he advanced, being at cessarily put to a farther rise of price; the rate of £1:14: 6 per cent. of inbecause the purchaser, who gives more terest on the sum borrowed. In genegi than £100 Sterling for it, may be call- ral, however, the security granted to ed upon the next day to give it up to the lender, or the capital for which he government for £100. Now, as £100 receives credit, consists of a quantity of 5 per cent. stock is worth £100 of stock of different kinds. Thus, in Sterling, while £100 of 4 per cent. is the loan of twenty-two millions in worth only £80 Sterling, and £100 of 1812, the lenders received £120 of 3 3 per cent. stock only £60 Sterling, per cent. red. and £56 of 3 per cento reckoning that price their true value consols, for every £100 Sterling adwhich yields, 5 per cent. to the pur- vanced. Now, £120 at 3 per cent. chaser, it is obvious that 5 per cent yields £3, 125., and £56 at 3 per cent. stock cannot rise above its true value, yields £1 :13:7, consequently the without making the purchaser run the sender had £5:5:7 per cent. for his risk of being paid off with less than it money. While the loan is going oncost him ; while - per cents. may rise that is, before the last instalment is £20, and 3 per cents. £40, before the paid up, the lender or contractor is at purchaser runs any such risk. The liberty to sell or transfer to another, prospect, then, of this rise induces at once, the different kinds of stock the lender to advance money to go- which he himself receives, and in the vernment on easier terms than he same proportion as he receives them. would be disposed to do if there were Thus in the loan of 1812, mentioned no such prospect; and though, with above, the contractor had it in his all this advantage, government has power, so long as his instalments were seldom been able to borrow at a lower not all paid up, either to sell the 3 per rate than 5 per cent., there is no doubt per cent. red. and the 3 per cent. conthat the loans have been procured on sols, separately, or to transfer them more favourable terms than they would together, as he received them, in the have been, had the interest been paid proportion of £120 of the one and £58 on the actual sum borrowed, and not of the other. These two sums, taken on a nominal capital. It is for the together, constitute what is called the same reason, that when stock rises a- omnium of that loan ; and as they cost hove its true value (meaning always; the contractor exactly £100 Sterlingo



he would either gain or lose by the consols, and 6s. 11d. annuity, to tercontract, according as he could get minate at the end of 493 years. The more or less than £100 for them. If interest at which the money was borhe sold them for £101, omnium would rowed was £4:14:11 per cent during be said to be at a premium of £1 ; and the first 49 years, and £4:8:0 after if for £99, it would be at £1 discount. that period, being considerably below At the time the loan is contracted, the legal interest. That loan, howomnium is generally at a premium, ever, was considered at the time unand that premium is called the bonus usually favourable to the public. to the contractor.

I shall now apply the preceding reThere is still andther circumstance marks to the explanation of the newsconnected with the manner of nego- paper reports of the stocks, and shall ciating a loan, which it may be neces- take an example from the papers at sary to explain. When the minister random. On the 20th of October last, is prepared to contract for any given the following report was given of the amount, he intimates to the principal price of stocks for that day : bankers or monied men, that he wants

Bank stock

273 such and such a sum in loan, that he

76 will give so much of one or more sorts

3 per cent red.
8 per cent consols

77.18 of stock for every £100 sterling ad

862 vanced, and that the bidding is to be

3 per cent in another kind of stock. The mean

4 per cent

9576 ing of this will be best explained by an

5 per cent

1071 Long ann.

20 example. In 1812, when 22 millions

Omnium were borrowed, the ministers gave no

0%, 0.. tice to the bankers that he was prepared The number in the above table to give for every £100 advanced, £120 posite each kind of stock, expresses in of 3 per cent red. stock, together with Pounds, and a fraction of a Pound Steran additional sum of 3 per cent con- ling, the price at which £100 of that sols. The bankers were then required stock was sold on the day mentioned. to give in each a sealed offer, stating The first, viz. Bank stock, 2734, how much consols they would require means that £100 share of the Bank of in addition to the £120 red., and the England sold at an early part of the individual of course was preferred who day for £273, or £273: 10:0 Steroffered to advance the money for the ling, and afterwards rose to £2738, or the least additional sum of consols. £273 : 15:0. A £100 of 3 per cent In the case alluded to, the offers or bid- red., sold at first for £76: 15:0, and dings were all the same, none being afterwards fell to £76: 7:6. A £100 willing to advance £100 for less than of consols sold in the morning for £56 consols in addition to the £120 £77 : 5:0, then rose to £77 : 7:6, red. Sometimes the bidding takes then to £77: 10:0, and at last felí place, not on any kind of stock, but to £77: 2:6. A £100 of 4 per cents on a certain annuity, which is to ter- sold first at £95: 5: 0, and then rose minate in a given number of years. to £96, and so of the others. The Thus, in the loan of 12 millions in article Long Ann. means the annuities 1811, it was intimated to the contrac- granted in the loan of 1811, mentiontors, that for every £100 Sterling which ed above, and at various other times, they advanced, they should receive payable to the public creditor till 1860, £100 of 3 per cent red., £20 of 3 per when they drop. They are bought cent consols, and £20 of 4 per cent and sold at so many years purchase, in consols, together with an addition of the instance above at 20 years—that an annuity, to continue 49 years, is, a long annuity of £100 cost on the and the bidding, or point of compe- 20th of October last £2012: 10:0. tition among the contractors, was, Omnium on that day was at a discount, who would lend the money for the first at 175. 6d. and afterward at 10s, least annuity in addition to the fixed per cent; or, in other words, the conamount of stock. The lowest bid- iractor was obliged to sell for £99: 2:6 ding on this occasion was 6s. 11d. and £99 : 10 : 0, what originally cost of annuity; so that the. omnium in him £100. that loan consisted of the following It appears, from the above table, that items-£100 of 3 per cent red., £20 of the 3 per cent consols on the 20th of 3 per cent consols, £20 of 4 per cent October were from one-half to one per

pent higher than the 3 per cent red. every £77 invested, being at the rate This difference is owing, not to the of about £3 18s. per cent.--in the 4 interest which they bear, for that is per cents, he draws £4 for every £95 the same in both cases, but to the dif- invested, being at the rate of £4:4:2 ferent periods at which the interest is per cent-and in the 5 per cents, he payable. The half yearly interest, or draws £5 for every £107 invested, bedividend on the red., was paid on the ing at the rate of about £t : 13: 5 per 10th of October, and that on the con- cent. sols on the 5th of July. On the first, I intended at one time to have contherefore, there was only ten days of in- structed a table, exhibiting at one view terest on the 20th, but on the second the different rates of interest which there was three months and a half, and each of the stocks yield at different as the purchaser buys not only the stock, prices, but the following general rule but also the interest due upon it at the will perhaps be as acceptable to most time, the consols were more valuable of your readers. To find the rate of than the red., by about three months interest which the 3 per cents will yield interest, or 15s. When it is said that at any given price ; divide 300 by the the purchaser buys not only the stock price of the stock, and the quotient but the interest due upon it, it is will be pounds, multiply the remainmeant that at whatever time he pur- der by 20, and divide again by the chases, he is entitled to draw the next price, the quotient will be shillings, half year's dividend, though it should multiply the next remainder by 12, fall due a few weeks after. For some and divide as before, the quotient will days previous to the payment of the be pence and these pounds, shillings, dividends, no sale, or rather no trans- and pence are the interest drawn for fer, can be made at the bank, in order every £100 Sterling invested at that to give leisure for the payment of the price. Thus, to take the above exinterest. That particular kind of stock ample, 300 divided by 77, according is then said to be shut.

to the rule, gives £3:17:11, or nearIn judging what kind of stock it is ly £3 18s. If the stock be 4 per cents, most advantageous to purchase, various divide 400 by the price, if it be 5 per circumstances are to be taken into ac- cents, divide 500 by the price, and the count, according to the price and the quotients will be the interest required. particular views of the purchaser. There is still another point connectWhen all the stocks are at their true ed with the subject of the stocks, on value, that is, 3 per cents at £60, 4 per which some of your readers, perhaps, cents at $80, and 5 per cents at $100, may wish to have some information, I they will each yield to the purchaser 5 mean the Sinking Fund. I have alper cent for his money, and if he intends ready trespassed so long, however, that therefore to invest permanently, it is I cannot now enter at length upon the of little consequence what sort he pur- subject, and shall therefore simply chases, because his interest is not to state the general principle of its operabe affected by any subsequent rise or tion as a means of redeeming or canfall in price. If he has the prospect, celling the national debt. When gohowever, of selling out again, he should vernment borrows a sum of money, prefer the 3 per cents, because, for the taxes of course are imposed for paying reasons already mentioned, they are the interest of that money, but to a likely to rise higher in proportion than greater extent than are barely sufficient any other. When all the stocks are for the payment of that interest. The above their true value, the purchaser surplus constitutes what is called the who buys for the purpose of laying out sinking fund, and is put into the hands his money permanently at interest, of certain commissioners appointed by should prefer the 5 per cents, because Parliament. These commissioners emthey will yield the highest interest. ploy it in purchasing stock on account Thus, in the above table, taking the of Government, and draw at the Bank price of the 3 per cents at 77, the 4 of England the half yearly dividends per cents at 95, and the 5 per cents at on that stock, in the same way as any 107 in round numbers, the following other public creditors. These divid is the rate of interest which the pur- ends, or interests, are again laid out in chaser draws for his money in cash. the purchase of new stock, for which In the 3 per cents, he draws £3 for they draw interest, and employ it again



in the same way, so that the original AN HISTORICAL AND GEOGRAPHICAL sum with which they commenced their purchases goes on accumulating at compound interest. The stock thus purchased may be considered as so

SCANDINAVIA, DURING THE MIDmuch of the national debt redeemed, because though the public derives no immediate advantage from it, so long (Continued from page 141.) as the commissioners draw the interest of their stock (it being a matter of no The other commonly frequented consequence whether the interest is route passed over the Caspian Sea paid to them or other public creditors), from Derbend, and the other maritime yet as the sum purchased by them is and staple towns on its southern coast. purchased for government, the latter This sea is extremely remarkable, both becomes its own creditor to that a- on account of its situation in the midst mount, and may cancel or leave off of extensive countries, between which paying the interest of the same when- it greatly facilitates the communicaever it thinks proper. Were the com- tion, and likewise for this peculiarity, missioners allowed to go on purchase that notwithstanding its magnitude, ing, and no great accumulation of new it has no outlet. Many geographers debt to take place, it is possible that have therefore supposed, forming an they might in time get the whole of erroneous conclusion from other seas, the government stock into their hands, that it had a connexion either with the and of course the whole national debt Black, Northern, or Eastern Sea. Cazwould be paid off. During the war wini thinks that it flows into the first, this event was perhaps impossible, and with which he supposes it to be coneven now various circumstances concurrected by a subterraneous canal. He to protract it to an indefinitely distant writes thus: “ The sea of Alchazr has period. In 1813, the commissioners neither its origin from (is neither a had purchased to the amount of 236 bay of) the ocean, or from any other millions, the whole debt being about sea, but it falls into the ocean through 700 millions. In that year the opera- the gulf of Constantinople. This sea tions of the commissioners were stop- is exceedingly large, for it washes ped, and instead of allowing them to Chazaria, Dailam (Ghilan), Thabaridraw the interest of the 236 millions stan, Georgia, and the desert Siah for the purchase of new stock, that in- Kiuh ;” and in another place, where terest was employed either for the cur- he speaks of seas, he says, “ The sea rent services of the year, or for paying of Georgia and Dailam (the Chazarian the interest of new loans. Though a sea) is separated from all others, and sinking fund, on this principle, is ob- is not united with any of the seas viously, in certain circumstances, a mentioned. Large rivers and springs, powerful engine towards the redemp- which never fail, discharge their wation of debt, it has not hitherto pro- ters into it. Alhaucali reports, that duced all the effects which were at first this sea is black at the bottom, and expected from it. At the same time that it unites itself with the Black Sea it is undeniable that it has been pro- under ground. To the west of it lies ductive of many good consequences, Aderbijan, to the south Thabaristan, both direct and collateral, and is in to the east Alkaria, and to the north many respects worthy of the distin- Chazaria. Its length is 1000 miles, guished statesmen to whose firmness and its breadth, from Georgia to the and decision it owes all its efficacy. river Aila, 550.” “On the north side Such of your readers as wish for more of the sea is the Atel (the Rha of the information on this subject, may con- Greeks, and the modern Volga), a sult “ An Inquiry into the Manage- large river in the country of Chazaria, ment, &c. of the National Debt,” by Dr which in magnitude resembles the Hamilton of Aberdeen, and if my pre- Tigris. It rises in the country of the sent and former communications shall Russians and Bulgarians, and disten l in any degree to facilitate their charges itself into the sea of Chazaria. study of that profound work, I shall Intelligent men affirm, that this river consider them as not altogether use- flows in seventy-five branches, each of less.— I am, Sir, your most obedient which is itself a large river. Its body servant,

T. N. of water is never changed or dimi

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