"LINCOLN'S FINANCE OF WAR."
[To THE EDITOR or THE " SPECTATOR."]
Sun—When this letter is read the time allotted for subscription to the " Victory War Loan " will have expired and thoughts will be turning to the future finance of the war. I venture to offer my contribution to that extremely important subject—drawn from what a correspondent of the Spectator has called " Lincoln's Finance of War " (November 27th, 1915, p. 737), the author of which was Mr. Salmon P. Chase, Lincoln's Secretary of the Treasury, in which, in respect of its legal-tender provision, its autlidan later, when Chief Justice of the United States, confessed "he had committed an error " (12th Wallace U.S. Supreme Court Reports, p. 576).
Under the Act of Congress of June 30th, 1864. as amended by the Act of March 3rd, 1865, there were issued by the United States Treasury $828,809,000 of notes payable in three years with interest at the rate of 7.3 per cent., with the privilege of conversion into 6 per cent. long-term bonds. These were payable to bearer, and (having the legal-tender quality annexed) passed, if the owner desired, into currency alike with other issues of paper money. I am not quite certain in what denominations these notes were issued, but I have a distinct recollection of receiving a part (if not all) of my pay as Lieutenant, while in hospital in Atlanta, after the battle of Jonesboro, September 1st, 1861, in these " 7.30 " notes, as they were called, from the circumstance that they yielded seven dollars and thirty cents per hundred dollars per annum interest, equivalent to two cents per day on each $100. (I may perhaps he permitted to add that, having no other means except the pay thus received, my notes speedily passed into the hands of a tailor, a bootmaker, and others whose supplies were needed to replace articles damaged in a campaign of four months without so much as a single day's respite.) These preliminaries at once suggest my " contribution " to the .subject of " the future finance of the war."
The " War Savings Certificates " should be made payable to the bearer or registered (as at present), at the option of the purchaser, and they should be issued not only in the present denominations of fifteen shillings and sixpence and multiples of that sum, but also, at least, in a denomination of seven shillings and ninepence, if not also in a still smaller denomination of, say, four shillings. I lay particular stress, however, upon the negotiable character of these notes; their denomination is a minor although not wholly unimportant consideration. If it be objected that, even in the absence of a legal-tender quality, there would be a danger of inflating the currency (with a consequent increase in the present rising prices) by the adoption of this suggestion, the answer is, that there would be a constant lessening of this danger as the value of the notes increased by the addition of the interest duo upon them.
I am assured by many who know England better than I do that very large numbers of persons are extremely suspicious of advice in money matters, extremely tenacioqs of secrecy, and very unwilling to part with money unless it is always instantly available for the purposes for which money exists. Take the case of a domestic servant. If on receiving her wages she knows that she can take the sum of seven shillings and ninepence to the post office and there, without signing or filling in a " form " or giving her name, receive in return for that sum a piece of paper across the counter, just as if she were buying a bat, which piece of paper is always just as good in every way as the silver and copper of which she had divested herself, and which (if she chose to keep it in her possession) would in five years be exchangeable (also at the post office) for ten shillings, and in the meantime be growing in value daily, is it not reasonable to suppose that she would not only do this thing herself, but also recommend her brother or her father or her sweetheart to do the like? We who " do our bit " by taking the War Loan through our bankers could extend our financial interest in the war by paying all tips in this new currency when possible, by offering to pay wages in it (if objection is not made), and in many other ways which will readily occur to those who have imaginations.
Now for a comparison between the twenty-three " loyal States " of the North in the Civil War and the British Isles in this war of ours. In 1860 (the year preceding the Civil War) the population of the former was approximately twenty-one and a half millions. The population of the British Islands in 1914 was estimated to be forty-six millions (see lithitakcee. .4lmanack, 1917, IL 487). The issue of the " 7.30 " notes in the last four or fire inehtliS of the Civil War (sit omen) was about .110,600,000. The American notes (payable to bearer) carried 7-3/10 per cent. (using the American form of statement), that is to say, in English parlance, £7 Gs. per cent. The British " War Savings Certificates " carry interest at £5 per cent. compounded, thus yielding at maturity ..t5 4s. Gd. per cent. The American notes matured in three years. The English " Certificates " mature in five years. According to the Postmaster-General (at Heywood, Lanes, last Saturday) £125,000,000 had been " raised " from " Certificates " up to December 1st last. On the assumption that relative population affords a guide, during the next four. or five months, other things being equal, it is conceivable that an additional £300,003,000 or £400.000,000 might be raised. But, in my humble judgment, negotiability is an essential element of such a success.
There are many things upon which one could expatiate in this connexion, if time and space permitted—the desirability of linking financial interest with patriotism by putting it in the power of every subject of His Majesty to take part in the " finance of the war " by a method which is acceptable to him or her, the saving of paper wasted in " forms," the release of officials whose time is consumed in filling them up, the removal of the irritation caused to those whose. education is limited and who are unwilling to expose their deficiency, &c., I have only to add that some of my facts are derived from Dewey's Financial History of the United States, 1903, pp. 310 to 320, to which I beg to refer those who care to make a careful study of the suggestions herein offered.—I am, Sir, &c., S. R. H.
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