Nothing looks so sensible as a sinking fund to pay
off a loan year by year, and nothing succeeds so badly. The burden always proves too heavy at first. The Spanish Government, for instance, according to the Times, has now, out of a revenue of £30,000,000, to provide £13,000,000 a year, increasing every year up to £20,000,000, for the service of the Debt, that is, for interest and sinking funds. This is too onerous, and a new " adjustment " is to be arranged, a plan ruinous to credit, even if it be accepted. If Spanish statesmen must compound, it would be far wiser for them to repudiate utterly the unpaid coupons, abolish sinking funds, and pay steadily the interest they originally promised, three per cent. That would not take them £10,000,000 a year, and in twenty years they would have as good credit as any second-class State. A better way still would be to halve the bonds and pay six per cent., reserving the right to pay off at par ; but the bondholders would fight that. They always con- tend for large nominal amounts.
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