676 REPOET— 1880. 



of course, with each augmentation to the first-created sinking fund, a vast addition 

 to the ultimate saving wUl accrue. In the instance cited above the original fund is 

 a half per cent, or 5,000/. per million. To redeem that amount of six per cent, deht, 

 the annuity required, whether applied hj repurchase in the open market, by grant 

 of diminishing annuities, or by a checked cumulative sinking fund, is — 



It will be advisable here to say a few words respecting the advantages and 

 demerits of the three principles of redemption enumerated above. 



Section I. — Rejmrchase. 



In repaying the national debt of Great Britain, or any other country, on the 

 S3-stem now promulgated, no alteration of the existing fiscal system need ensue, 

 provided the stock was periodically purchased for cancellation. Government would 

 merely have to publish a plan of redemption, detailing the amount of stock to be 

 cancelled each three or six months. When the redemptions were eflected below 

 par the surplus saving could be placed to a fund, and accumulated for the purpose 

 of defraj-ing the losses incurred by cancellations above par. 



Section 2. — Diminishing Annuities. 



In no form whatever can annuities take more than a secondary part as a 

 medium for reducing debt. By entailing the loss of capital, a limit is placed on 

 their general use. Mr. M'CuUoch justly described them as radically objectionable, 

 and every sensible man must coincide in that opinion. Each dividend diminishes 

 the selling Aalue of the annuity. Consequently what we may designate the 

 ' capital ' is constantly decreasing, until at last, nothing remains. As a means of 

 reducing debt they are efficacious, but I deny that they are the cheapest or best 

 method. 



Compared with ordiuaiy annuities, I have little hesitation in .saying that 

 diminisliing annuities are, from the borrower's point of view, vastly superior ; thus 

 in the loan under consideration, by the old system 10,000 annuities of 6/. 3s. M. 

 each would be issued, whereas by my newly discovered system they woidd be for 

 the first decade 6/. 10s. each, second 6/. 4s., third 5/. 18s., fourth 5Z. 12s., fifth 

 nl. Os., and sixth 5/. each, while for the last two years 3/. would be paid each an- 

 nuitant. 



Or, to bring the subject more liome to ourselves, the Government of Great 

 Britain could issue 3 per cent, annuities of 3/. 10s. each for forty years, and 21. 10s. 

 each for the remaining forty-seven years ; or agam, 3/. 10s. each for thirty yeai-s, 

 3/. each for the next thirty years, and 21. 10s. each for the last twenty-four years. 

 Thei'e is absolutely no limit to the number of possible ^-ariations. This invention 

 opens up a new and illimitable field in the domain of financial economy. An end- 

 less scope exists for the development of fresh schemes. In compiling an ordinary 

 table of annuities, the value of money at compound interest is calculated; so in 

 these diminishing annuities is this element likewise taken into account, and although 

 the borrower is enabled to repay the loan at a greatly decreased cost, the lender 

 obtains the value of his money by receiving 6/. 10s. for the first decade, and Ql. 4s. 

 for the next, instead of 6/. 3s. 4f/. per annum throughout. The value of the extra 

 6s. Hd. for the first period and Sd. for the second, when computed at compoimd 

 interest, exactly compensates for the subsequent losses of 5s. 4rf., lis. 4(/., 17s. M., 

 and 1/. 3s. Ad. during each of the next decennial periods, and of 3/. 3s. Ad. for the 

 last two years. 



Section 3. — Terminable Debentures. 



Terminable debentures, repayable by fixed quarterly drawings, are an even 

 cheaper method of redeeming debts than annuities. This is a first but small 

 advantage when compared with others I shall enumerate. I classify them as 

 under : — 



