6 MAY 1854, Page 12

TOPICS OF THE DAY.

MR. GLADSTONE'S LOAN.

THE temporary cheek given to Mr. Gladstone in his advance to- wards a loan of 6,000,000/. on Exchequer Bonds may perhaps be ascribed chiefly to the prejudice with which the English mind re- gards any novelty ; and the prejudice is aggravated when the novelty is recommended by strict reasoning. The public prefers the empirical to the logical, and views an intellectual treatment of money almost with as much suspicion as a literary man would be watched if he came too near the coffers of the Bank. The public can seldom believe in a man who has two capacities, and is always prepared to discredit a judge who has been convicted of poetry, a philosopher who has been a dramatist, a colonel who understands thorough-bass, a statesman who may have stood before the easel. A man must live down the prejudice as a practical example, before the public can remember how often this narrow presumption has been rebuked ; and although Mr. Gladstone proved himself last year to be a politician and a financier, still the public is reminded by party bitterness or self-interest, that Mr. Gladstone cannot be trusted with money because he is learned in theology. It is curious how much of theory mingles with this bigoted empiricism; for if the proof of the pudding is in its eating, the public has ample reason to trust Mr. Gladstone's views of state economy from the benefit which it already derives in further release of commerce from oppressive taxation and in a better understanding of its finance.

It is a fashion to treat the present Chancellor as "a theorist"; but we are not aware that his critics have any certificate which gives them a right to underrate him. The last official act which brought Lord Monteagle before the public was his connexion with the fraud in the Exchequer Bills over which he is watchman and comptroller. Mr. Disraeli has been a Finance Minister, whose only budget died in childbirth ; and he has never had the practical opportunity of showing the public how he intended "to adjust finance to commerce." Another class of critics out of doors object to Mr. Gladstone only because he does not attempt a loan in the usual way ; assuring him that he might easily get it in that form. There the cloven foot peeps out!—it was to be expected that many who would be too ready to come forward with ad- vances "in the usual way" would endeavour to suppress the new method by which Mr. Gladstone is seeking to obtain a loan of money from the public possessing it. The favourite Minister for dealers in loans was that one who obtained the title of "Hea- ven-born," and who set the very model of loans to be taken "in the usual way." With that Minister, indeed, Mr. Glad- stone stands in the widest contrast. Mr. Pitt left no works on theology ; nor was he a poet, though he lisped in ;lum- bers, and his lispings are still taken for inspirations. For we have practical proof that the faith in Pitt and Pittism survives,the utter discredit of his finance. Mr. Pitt took loans "in the usual way "—that is, he created a 1001. of stock nominally at three per cent, and accepted an average market-price so monstrously below the actual sum lent, that the operation: ought to have received new names. He began in a bad school, and he left disciples. His own most striking creation was the establishing of the Sinking- fund,—borrowing so much the more to pay oft' driblets of enormous loans contracted at the same time ; a notion which still lurks amongst the French revolutionaries, whom it was Mr. Pitt's Heaven-sent mission to put down. From 1803 to the end of the war, the aver- age market-price of Three per Cents was 621. 17s. 6d., but the price at which loans were contracted was 601. 7s. 6(1. Even that was an improvement on previous borrowings. From 1793 to 1801, the average market-price was 61/. 17s. 661., but the average rate of contracts was 571. 7s. 6d. Those who are acquainted with pro- ceedings in the City know what this means, and even the country gentlemen are not uninitiated; but let us translate it "for the benefit of the country ladies." A loan of 1001. at a fixed rate of interest may be depreciated with the credit of the borrower,, and the document representing it may cease to be worth so niuch as 100/. ; a new purchaser would give less than that sum. In those days, at the very startin$, such a loan was worthless than 62/. ; and no wonder, when the Minister of the day would accept 571. 7s. 6(1. from a contractor, and tell posterity that he had borrowed "a hundred pounds "----posterity having to pay interest as if the 1Q01. had really been borrowed. A contractor who could get a loan at 571. 17s. 6d. and could come into the market to realize 611. 17s. 6d., would put into his pocket something like eight per cent by merely acting as the middleman. Of course, fine fortunes were made in those days ; and in the City the " spirit of the epoch " was declared to be " Heaven-born." During the two periods we have mentioned, the public lost more than 6,600,0001. on the money borrowed to keep up the pretence of redeeming debt by the Sinking-fund. But the loss appears to have helped to conceal from the public mind the full enormity of what was inflicted upon it by the method of taking loans "in the usual way." Luckily, in our day these things are better understood, and half Mr. Gladstone's difficulty is occasioned by his endeavour to render them still more distinct. He attempts no juggle ; he does not shuffle sinking-fund and new loans; he tries to render the public accounts more simple ; he bases his estimates on actual values in the market and on actual circumstances of the day; and by means of his Exchequer Bond he proves his preference for dealing direct with the public rather than dealing with the middleman. Was it not to be expected that the middleman interest should be indignant ? No doubt, that is so ; and hence the abusive bitterness of hostile criticism, backed by technical slang on those formidable things fractions and quotations, to mystify the un- initiated, and drive so really popular a financier from a position unprofitable to the traders in contracts and loans. Mr. Gladstone professes no miraculous inspiration by which he can borrow large sums of money with immediate profit to the contractors, in a mode so as to save the taxpayer. He is perfectly open ; the public knows exactly what he is borrowing, the time for which it is borrowed, and the precise cost of the transaction. The cost is perhaps as nearly as possible the actual market value of the securities. They have been compared, indeed, with loans to rail- way companies, or with the rate of discount for the temporay ac- commodation in the City at some particular day: but practical men know that the transactions are governed by very different laws ; and, however excellent may be the credit of particular rail- way companies, the public cannot forget that companies with ex- cellent credit have rendered very small dividends or none, and that in the virtual abandonment of Mr. Cardwell's bill, a check upon the most wasteful part of railway expenditure—the construction of lighting lines—has been removed. It is absurd, therefore, to pre- tend that in the market where railway adventures bear an interest of 41 per cent, a Government proposal for a loan of money at 4 per cent, on security as undoubted as if the globe itself were mortgaged for the redemption, can be considered of inferior value. The prac- tical question now is, whether the public can understand the na- ture and value of the new instrument ; or whether the middleman interest for loans "in the usual way" shall succeed in mystifying the public, and depriving it of an excellent investment, while the honest finance of a straightforward Minister is obstructed.