interest of six per cent., irredeemable by any payment exceeding four dollars and two-thirds of a dollar per annum, on account both of principal and interest, and to have, at the end of ten years, twenty-six dollars and eighty-eight cents funded at the like interest and rate of redemption; or to have an annuity, for the remainder of life, upon the contingency of fixing to a given age, not less distant than ten years, computing interest at four per cent.; or to have an annuity, for the remainder of life, upon the contingency of the survivorship of the youngest of two persons, computing interest in this case also at four per cent. In addition to the foregoing loan, payable wholly in the debt, the Secretary would propose that one should be opened for ten millions of dollars, on the following plan: That, for every hundred dollars subscribed, payable one-half in specie, and the other half in debt (as well principal as interest), the subscriber be entitled to an annuity or yearly interest of five per cent., irredeemable by any payment exceeding six dollars per annum, on account both of principal and interest. The principles and operation of these different plans may now require explanation. The first is simply a proposition for paying one-third of the debt in land, and funding the other two-thirds at the existing rate of interest, and upon the same terms of redemption to which it is at present subject. Here is no conjecture, no calculation of probabilities. The creditor is offered the advantage of making his interest principal, and he is asked to facilitate to the Government an effectual provision for his demands, by accepting a third part of them in land, at a fair valuation. The general price at which the Western lands have been heretofore sold, has been a dollar per acre in public securities; but, at the time the principal purchases were made, these securities were worth, in the market, less than three shillings in the pound. The nominal price, therefore, would not be the proper standard, under present circumstances, nor would the precise specie value then given be a just rule; because, as the payments were to be made by instalments, and the securities were, at the times of the purchases, extremely low, the probability of a moderate rise must be presumed to have been taken into the account. Twenty cents, therefore, seems to bear an equitable proportion to the two considerations of value at the time and likelihood of increase. It will be understood that, upon this plan, the public retains the advantage of availing itself of any fall in the market rate of interest, for reducing that upon the debt; which is perfectly just, as no present sacrifice, either in the quantum of the principal, or in the rate of interest, is required from the creditor. The inducement to the measure is, the payment of one-third of the debt in land. The second plan is grounded upon the supposition that interest, in five years, will fall to five per cent.; in fifteen more, to four. As the capital remains entire, but bearing an interest of four per cent. only, compensation is to be made to the creditor for the interest of two per cent. per annum, for five years, and of one per cent. per annum, for fifteen years, to commence at the distance of five years. The present value of these two sums or annuities, computed according to the terms of the supposition, is, by strict calculation, fifteen dollars and the seven hundred and ninety-two thousandth part of a dollar-a fraction less than the sum proposed. The inducement of the measure here, is the reduction of interest to a rate more within the compass of a convenient provision, and the payment of the compensation in lands. The inducements to the individual, are, the accommodation afforded to the public; the high probability of a complete equivalent; the chance even of gain, should the rate of interest fall, either more speedily, or in a greater degree than the calculation supposes. Should it fall to five per cent. sooner than five years; should it fall lower than five, before the additional fifteen were expired; or, should it fall below four, previous to the payment of the debt; there would be, in each case, an absolute profit to the creditor. As his capital will remain entire, the value of it will increase with every decrease of the rate of interest. The third plan proceeds upon the like supposition of a suc cessive fall in the rate of interest, and upon that supposition offers an equivalent to the creditor: One hundred dollars, bearing an interest of six per cent. for five years; or five per cent. for fifteen years; and thenceforth, of four per cent. (these being the successive rates of interest in the market), is equal to a capital of $122.510725 parts, bearing an interest of four per cent., which, converted into a capital, bearing a fixed rate of interest of six per cent., is equal to $81.6738166 parts. The difference between sixty-six dollars and two-thirds of a dollar (the sum to be funded immediately), and this last sum, is $15.0172 parts, which, at six per cent. per annum, amounts, at the end of ten years, to $26.8755 parts—the sum to be funded at the expiration of that period. It ought, however, to be acknowledged that this calculation does not make allowance for the principle of redemption, which the plan itself includes; upon which principle, the equivalent, in a capital of six per cent., would be, by strict calculation, $87.50766 parts. But there are two considerations which induce the Secretary to think that the one proposed would operate more equitably than this: One is, that it may not be very early in the power of the United States to avail themselves of the right of redemption reserved in the plan; the other is, that with regard to the part to be funded at the end of ten years, the principle of redemption is suspended during that time, and the full interest of six per cent. goes on improving at the same rate; which, for the last five years, will exceed the market rate of interest, according to the supposition. The equivalent is regulated in this plan, by the circumstance of fixing the rate of interest higher than it is supposed it will continue to be in the market, permitting only a gradual discharge of the debt, in an established proportion, and consequently preventing advantage being taken of any decrease of interest below the stipulated rate. Thus the true value of eighty-one dollars and sixty-seven cents, the capital proposed, considered as a perpetuity, and bearing six per cent. interest, when the market rate of interest was five per cent., would be a small fraction more than ninety-eight dollars; when it was four per cent. would be one hundred and twenty-two dollars and fifty-one cents. But the proposed capital being subject to gradual redemption, it is evident that its value, in each case, would be somewhat less. Yet, from this may be perceived the manner in which a less capital, at a fixed rate of interest, becomes an equivalent for a greater capital, at a rate liable to variation and diminution. It is presumable that those creditors who do not entertain a favorable opinion of property in Western lands, will give a preference to this last mode of modelling the debt. The Secretary is sincere in affirming, that, in his opinion, it will be likely to prove, to the full, as beneficial to the creditor, as a provision for his debt upon its present terms. It is not intended, in either case, to oblige the Government to redeem in the proportion specified, but to secure to it the right of doing so, to avoid the inconvenience of a perpetuity. The fourth and fifth plans abandon the supposition which is the basis of the two preceding ones, and offer only four per cent. throughout. The reason of this is, that the payment, being deferred, there will be an accumulation of compound interest, in the intermediate period, against the public, which, without a very provident administration, would turn to its detriment, and the suspension of the burthen would be too apt to beget a relaxation of efforts in the mean time. The measure, therefore, its object being temporary accommodation, could only be advisable upon a moderate rate of interest. With regard to individuals, the inducement will be sufficient at four per cent. There is no disposition of money, in private loans, making allowance for the usual delays and casualties, which would be equally beneficial as a future provision. A hundred dollars advanced upon the life of a person of eleven years old, would produce an annuity* of— Dolls. Parts. If commencing at twenty-one, of 10.346 18.803 *See Schedule F. Dolls. Parts. 37.286 78.580 If commencing at forty-one, of If commencing at fifty-one, of The same sum advanced upon the chance of the survivorship of the youngest of two lives, one of the persons being twenty-five, the other thirty years old, would produce, if the youngest of the two should survive, au annuity* for the remainder of life, of twenty-three dollars, five hundred and fifty-six parts. From these instances may readily be discerned the advantages which these deferred annuities afford, for securing a comfortable provision for the evening of life, or for wives who survive their husbands. The sixth plan also relinquishes the supposition, which is the foundation of the second and third, and offers a higher rate of interest, upon similar terms of redemption, for the consideration of the payment of one half of the loan in specie. This is a plan highly advantageous to the creditors who may be able to make that payment, while the specie itself could be applied in purchases of the debt, upon terms which would fully indemnify the public for the increased interest. It is not improbable that foreign holders of the domestic debt may embrace this as a desirable arrangement. As an auxiliary expedient, and by way of experiment, the Secretary would propose a loan upon the principles of a tontinet To consist of six classes, composed respectively of persons of the following ages: First class, of those of 20 years and under. Second class, of those above 20, and not exceeding 30. Third class, of those above 30, and not exceeding 40. Fourth class, of those above 40, and not exceeding 50. Fifth class, of those above 50, and not exceeding 60. Sixth class, of those above 60. Each share to be two hundred dollars; the number of shares, in each class, to be indefinite. Persons to be at liberty to sub * See Table, Schedule G. † See Table, Schedule H. |