M. Lafitte On The Reducti...
M. Lafitte, the Paris banker, has just published a pamphlet on the late project of the French Minister of Fi- nance for the reduction of the Government Anlnuities in -France. As M. Lafitte was one of the contractors for enabling that Ministcr to carry into execution his great financial plan, and belongs, rnoreover, to the Liberal party, by whom it was opposed, he was bound to shorv that his political opinions coincided with his pecuniary interests- that, for oiee, his party-fricnds were in the wrong, and the Cahinet in the right-and that, in generously ojferang to pocket some Teiilions of francs of the public money in the shape of commission, he was conferring a favour on Franee as well as on himself. His new ally, M. de Villele, by his manceuvres at the late election, had deprived h;m o his seat in the Chamber of Deputies, where he could have defended the new scheme. He therefore conceived! himnself obliged to asdress the public from the press, and the present pamphlet is the fruit of that szupposed necessity. As in the very few remarks which our space will allow us to make on this pamphlet we shall dissent frorm some of M. Lafitte's doctrines, we must begin by stating that in our opinion the author is a very clever person, who has written a very clever dissertation, but that his mirid is more conversant with details than principles, anti that his powers of reasoning are much more active than vigorous or well-directed. It may be questioned, however, whether many of the London or Paris baaklers could have pcoduced, on any similar occasion, such a mass of knowledge on a financial question-could have inetho_ dized that klowledge so well, and conveyed it to the public in kuch correct and appropriate language. If .ve look back to our late discussions in England on the much more important and ititeresting question of the currency, we shall scarecly finid an example of a prac- tical man publishing so comprehernsive, so sensible, and so well-written a treatise. The whole subject, so far as the policy or justice of the ministerial project was concerned, may be resolved into the fallowing questions: I. Had the Government a right to reduce the interest orn giving tIre annuitant an option of reductioni of annuity or repavment of principal ? 2. Wilas the exercise of this right too rigorous on the state annuitants ? S. Was the interest of monev really below 5 per cent. ? 4. WVas the appropriatinn or reduction of the sirking 'funm. preferable to a reduction of in'erest ? i r eZas not tile nmode of carrving through th-le rneastue the only one possible ? In answering these questionis, Al. Lafitte mainFains that the right of reduction or repayinent existed; that its exercise in tire specific case was just; that the in- iterest of money had fallen below five per cent. ; that 'it w-ould have been impolitic to have interfered with the sinking-fund ir lieu of reducing the interest; and that :t Minister proposed to execute this politic reduction in the onlw way prudent or possible. On at least three of these peints the opponents of the ministerial project are at issue with our aulthor. Thev dleny that the interest of inoney lhad fallen generally so low in France as to adlriit of the Go_ vernment borrowinig at 4 per cent ; they tberefore objected to the attempt of compelling the cr^ditors who lenit their - money at five pcr cent., to accept of four, by bringing against them a conspiracv of the great bankers of Europe; I and they give goodl reason far believing, that though a re- dutction of interest to a certain extent was wise, expedient, and practicable, a.,Ian of attaining that end by which addi- tional stock was created, waas neithvr tLe only possib!e nor the inostprudent modecof proceedinig. Frenell wvriters on finance, and particularly 2M. Lafitte, cvince a strong partiality for the principles esrablishe(l, and( the practice pursuedt in Fng- and rcspecting the management and reduietion of our public debt. But wvherc didl they ever find( hat a Finance Mliniister of England proposed to re.luce a five per cent. stock to a four. wvhen the former i)ad ordy ar- rived at par for a month or twvo before, and had not passed it mnore than five or six p\er ecent. - Least of all, wbere did thev ever find( that an Eniglish Minister proposed to reduce a 5 per cent. stock in the above circurnstances-not to a four, hut to a three-by addling a fourtli to the nomi- nal debt, whiclh in a short timne tLhe nation intinht have to redeem at par? If M. deo Villele andl his collagucs hadl possesscd patience enough to wvait for another year, and had ini the interval coiiluete(l the afl'?irs intrustedl to their management in such a manner as to inspire con;fidence in the continuance of peace,-to encourage national iv- dustry,-aiid to inc,ease public credit, there can be little doubt that the five per cents. would have at- tained the rate of 115 or 120 per cent. Then weuid tlave beell the time to have proposed a reduction of inter_ est, or a repayment of capital; andt hat reductionz coull have been effecteti from five to four per cent.. without.on the one hand, the bribe of an augmented capital, or on the o!her die overwhelming force of a Europeaan combination of banlkers andi speculators. The rise of five or six per cent. above par, and tlrat oniy a month or two before the proposed opTration, was not Sulch an it(rlicatioii of public credit in Fraicec, as wvarranted a reduction of interest from five to four. I is rliot at all improbable, thet if both bhambers had supported the Ministerial scheme, andl if the annuitants had had only the option of acccpting of a reduced interest, or of blngD repaid their princip:d. that rhev must have adopted tihe former alternative. ll rppeared from the accounts laitl before ti, Legislature. and tlhe speeches of opporition memrnbers, that tte great hoedv of, French fundliolders is conrposcEd of esolins of verv meode- rate ineans of living, wvleo having retirel fro) business. being unacquaintcedivith ti d(il, or lr sitdingz 1!1 tihe povinces, could find no other safe, convemnient, andl prefirable invest_ incimt for iheir money than in Goverinnent seculities. Suchl persons would ratlher accept of a disproportionate interest (vuhill certain biiits). thani a repavirent of their smanll capitals, of whiclh they c iull make ino imnmedia:e use. A combiniation of great barrk,-rs, who ceuld I ri-ig furals froni all the Government Securities of Eurnroc, to buv ul) the pO tion of renfes belongritng to this .nrv race of fund- !holtlers, wvould be sufficient to iiakC them agiec to ianiy tet ins. Nothing iuore ih requireil to shlow the I - con1safiitt'a reat.rtins in support of the justice of this measurc, tian tlie anproximation of the two following asscrtions:--' Inter,st in Paris, and in all the great towits of France. is b; itw, en 30 arid 4 per I c t."-' It wvas necessaarv for thih srcat operatieon to have Ita combiniationt of French'and a European Ranc'sis." If in- terest is at this ratr, and GovCrtntlit fl,'ovi t!Ie crcdit of a private person, surely it was not necessary to lring a lhost of Europeart speculators to compel the Feetich annluitants to accept of -uch Cqf1italrle ]'erons, Ull(rtr paill of bhiin p/aid their rnoiney aitl see-ing trher n.ries era.sed from thi (srnat fueL- I'lie betiefits which M1. Lafiite anticipated frorn tthe operation seems to he as Chim,rncal as the solienlle itscHl (to sav tlle ltast oif i!) Was 1r(eru nrT. '` l o ren(!er getelralt says he, '- tilc inruernernt of indstrdry and the abirldaitcc 0ot capital which ate obser-ahle ol soni pointc of F raice, a re Cetuirll oi thle re ntt s was a porwernirl mcau,s. It uoerld have caused a fall in the interest of mnoney in our lprovinces-it would have caused capiLal to hr transported thith-er ; and( by thc aid of capiral. woaduhl have formnedt new ir cal's of comnrnunication, established vom ks of industry, |excited labour. and renIdereti availableail the poptlaation ai'd ! all tire surfaccof Francc." Now it is almniost iecliedss to say, in answver to this reasoning, t1iwt it is the reduction of intcrest arisine from the abundlance t.f eapitucl in a coutntry, arid other caurses, which eltabies Goverrirmu(nt to borrow at a low rate and not the borroiving of Governnrint at a low rate wvhich reduees interest. Tirecflct is hiere imistaken .or the cause- tire verv golund( Ott whlich XM. LI,fitte rests th:,rJustlee o. Iproposzd niresure was, that the interest of motuey ggencralty in France was ):Jow 4 p;r cent., arid that. conscequently the Government 5 pIir ec;Os. ia(l risen above par' Ilatd tiey riseni to 12i instea(l of ] 05, thleln the incoinre atcrtiing f'reol an itvratment in thlecm wouldt be exaetly 4 per cert., andl such a natural rise iii the furnds xvouldl lIhave (lrivcit capital to the provinces as effi ettially as a rMeruittion of ilterest. Ban;k storl, for inseance in krnglatndl is nornirally iow SP ccitt. ; but it is almost superfluius to mncrrtion, that any personl purdhasint thatkirl of 'stock would have tIl pay forit just so muclh as would rlace the interest derivable fronl his mroarey so investtld on a levl wvithl that derivable fromo tlhe samrje amiounit vestuil in other fur s. By i1i. Lafitte's mode of reasoning, the change of our 4 per cents. to 34 iii the lire_ sent year, has heen the cause, and tint tthe consequence, of the reduced rate of interest at whicl moeay on good sec_ rity may now be borrowed. 'he same kind of ansjwef nay be ghen to the following statement, which completes the eulogiuti of tltc new measure:-" It, considering tbe state of our finiances, the piopecd scheime had other advan- tages. It lerfected our system of credit, by adding to -_ the srstesn of reductions : it diminished the exorbitant price which we give; fer the tse of foreign capital scarcely pail at homne 3. uper cen't., but paid with us 5: it limited cretit without attacking it; settled it Cn tie best ba5s-1 that of confidence instea4l of high price; arid Obligel capitals to require more conrduct oni the part of Governmlent by receiving less interest. In consideriig it, fiaaDy, iii aI political point of view it assured the peace of Europe by ' enaging France nOt to make w.ar for several yeers. a offred then, general arid relative utility: it wVas a real ad- vance in French civilization-a step made iu the career in which Eiglanid has gone before the world, and in which nations must follow her to find prosperity, light, and liberty." -With the omission of the latter senftence, which I seems little else but words, the advantages mentioned in I the above passage are as shadowy as the expectation that the new measure would have driven capital intQ the pro- vinces. M. Lafitte here places himilself in a dilemma fromn which it is difficult to escape. Either the French funtls were so much above par as to warrant a reduc- tion of the interest rithout injustice, and then that Interest was alreadly so eaectually redulced to pelsons who wislied to buy into them as to induce them to look out for other means of invostment, or they had so lately ar- rived at par, and ha(l risen so little above it, that itv was unl- just to attempt an i-nmediate reduction of the interest. AM. Lafitte, thiough a perfect Frenchman and a perfcCt Parisian, does justice and more thlan justice to our Eng- lish system of finance wheln he ascrihes to it the activity and extent of-our external commerce-the greatness of our internal traffic-the creatiOnI of so inany lines of water comm1unication-the wealth of our manufacturers, and all the wonders of our national prosperity. Though he has a considerable knowvledge of our commercial and financial position, we are afraid that in the warmth of his feelings towvards English liberty, or the excess of his admiration for English loans, contracts, and com- pound interest, he is sometimes apt to be crediilous respect- ing uts and our wealtlh. For instance, he informs his coun- trymen that the Bank of England, besides the coin whicll it has thrown into circulatioti, bas twenty millions of gold in its coffcrs. If this is the case, the Bank Directors ouglht to be cashiered for condemtninig to unproductive repose so much of the property of their constituents, and becoming the idle sentihels, instead of being the active managers, of their immense treasu res. X- LAZP7TTE ON THE REDUCTION OF TEE RENTES.