THE NEW' LOAN.
IT would astonish most people to be told that the new Loan is the most important yet issued. During the war, when men, women, and children were subscribing to the great loans, they felt that their money was feeding the guns ; every time a person made a fresh subscription, or arranged for an advance from his banker, or visited the post office to buy a bond, or put a stamp upon a War Savings Certificate, he saw, as it were, another shell for the good cause being thrust into the breach of a British gun. A Loan when the fighting is over seems a com- paratively dull thing, and yet it is no exaggeration to say that the new Loan is more important than all the others. For it has to discharge a particular purpose, and if that purpose be not discharged all the other Loans will have been subscribed in vain.
We have summarized elsewhere the hare facts of the Loan, and we want to write now specially of the meaning of the Loan, and of the obligation which rests upon every good citizen to subscribe to the utmost of his capacity. The Loan is what is called a Funding Loan. Though it is divided into two parts, both parts will serve the same end in their different ways. That end is to fund, in other words to postpone, the repayment of as much as possible of the Government's floating and short-dated debts. The whole credit of the country—and upon credit depends the revival of industry—hangs upon this successful funding. The immense floating debt consists principally of Treasury Bills (mostly for three months), Ways and Means ad- vances, Exchequer Bonds, and short-dated loans falling in 1924. It is only an incident of the Loan that it will pay off the £230,000,000 or £250,000,000 which is expected to be the deficit on the Budget of this year. To put the explanation in another way, a Funding Loan is the issue of a long-dated security by means of which the Government are able to pay off a floating debt gradually. A large part of the floating debt has been incurred by the arrange- ments made by the Government with the bankers. The investor will help the Government, among other things, to reduce the great inflation of currency which was the necessary result of these arrangements. So long as the bankers have to go on helping the Government out of tight places, so long will they be unable to perform their normal useful service of helping to finance industrial, enterprise. If the repayment of the short-dated loans be not postponed, the Government will not be able to meet all their liabilities. Of course the. Government; being honest—let us assume—would make a gallant attempt to pay their way even if the Loan failed. But the only manner in which they could attempt to do so would be by new taxation more crushing than any that has been dreamt of. In our opinion, taxation has already gone as far as it can possibly go if the revival of trade is not to be hampered at every turn.
It is desirable to meet at once some criticisms which one hears in casual conversation. It is said that the Government are so spendthrift in their methods that it is almost a wrong thing to give them more opportunities of extravagance by pouring money into their hands. Nobody could be more anxious to see stringent economy practised throughout the country than we are, but the criticism we have mentioned betrays an entire misunderstanding of the situation. The person who refused to subscribe would merely compel the Government to raise money in a more expensive way—for money the Government must have unless the credit of the country is to be destroyed—and he would thus, in the belief that by his actions he was preaching a homily on economy, be forcing the Government into
more extravagance than ever. We appeal strongly to every one who is capable of thinking the matter out for
himself to banish this objection from his mind. Another criticism which one commonly hears is that Mr. Austen Chamberlain has been much too generous, since he could have raised plenty of money at a lower rate of interest. Whether this criticism were justified or not, it would also have nothing to do with the need for making the Loan a success. But as a matter of fact the criticism cannot reasonably be supported. One has only to read the Stock Exchange reports to see that the last 5 per cent. War Loan which was issued at 95 is now quoted below that price. The 5 per cent. War Bonds, which are an extra- ordinarily attractive investment because they arc to be redeemed by the Government at a higher price than that at which they were sold, have not been selling freely enough to help the Goverrunent to get rid of their floating debt. There was nothing for it but to issues great Funding Loan on new terms more enticing than any that had gone before. For our part, we think that Mr. Chamberlain has most successfully combined ingenuity with good sense. By providing for the annual drawings at face value of the Victory Bonds, he has appealed to the speculative instinct of the nation without giving way to a form of gambling which would be unseemly and degrading in a great Government. The buyer of the Victory Bond pays £85 instead of the £80 which is the price of £100 in the 4 per cent. Funding Loan, and for the extra £5 he gets the chance of a large bonus if his Bond happens to be drawn fairly early. The £5 is, as it were, the price of his ticket for entering the Government casino. Another ingenious arrangement is that by which the Victory Bonds will be accepted at face value—as being worth £100 —in the payment of Death Duties. It almost makes death easy. And this plan has a valuable corollary—the harnessing of a considerable part of the Death Duties to paying off debt. Very attractive, too, are the arrangements for subscribing to both the Loan and the Bonds by easy payments, and the provision by which early buyers get in effect a rather higher return.for their money. At first sight the Victory Bonds may seem so much more attractive than the Funding. Loan that one might expect the Funding Loan to be comparatively disregarded. But we think nothing of the sort will happen. A very large number of people in this country are always looking out for something in the nature of a permanent security, or at all events one not requiring frequent. attention.
To sum up, our financial life is in our own hands. The small man who is most rightly and carefully ,provided for, and the big man, must alike help the Government to fund their Debt. This is a part, and a great part, of the duty of the nation. But there is a collateral duty without which the fast duty would be inauffieient,--it is for all to, work. hard to re-create our wealth, and to live quietly and moderately till that wealth reappears.
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