THE SEDDON GOVERNMENT FINANCING.

Clutha Leader, Volume XX, Issue 1003, 13 October 1893, Page 6

THE SEDDON GOVERNMENT FINANCING.

— • (Evening Press, Wellington.) Many of our readers perhaps do not trouble themselves about obtuse financial problems such as loan conversions and sinking funds; but on the eve of a general election, and with a glamor of skilful distortion surrounding the public accounts, it is as well to place as clearly as possible before the electors the actual meaning of one transaction in connection with which the Government have endeavored to deceive both Parliament and the country. We refer to. the conversion of the half-million 4 per cent, loau of 1863, now converted into one of L 650,000 at 3| per: cent I n order to show distinctly how hollow and unt principled the action of the Government has been in* this matter, and the real motive which was the mainspring of the transaction, we will take a comparative case which might; happen to any man in a community. Let us suppose that 30 years ago, in 1863, John Smith went to a loan company and borrowed LIOO at 4 per cent, with a stipulation that he had to pay a further 1 per cent, towards the extinction of the debt, and tjiat 4 per cent, was to be allowed on the accumulated annual payments of Ll year by year. It will at once be seen that although his yearly interest remained at L 4 he had a constantly increasing nest-egg earning ever expanding interest. At the end of 30 years, in 1893, he would be in this position : He would still owe the LIOO, and would be payirig L 4 per annum, but against this his accumulated payment would have amounted to L 32 12s. This would be augmented rapidly by the expansion of the compound interest, until by the end of about another 24 years the debt' would be extinguished, or if he chose td take his 4 per cent, as a set-off to his interest he* would in 1894 be receiving Ll 4s as interest on his sinking furid of L3O, which, being deducted frpm the L 4 he had to pay the loan company, would, leave his net interest at L 2 10s. Now, supposing he wished fpr some reason _to7: raise more money arid had no. security to offer,! what would he dp? He certainly has L3O of a. nest egg, but that is tied up as a security fco the loan company, therefore some way must be found to get it. He proposes to the corioipany to alter their security.- The LIOO loan is a really good cine for them. It is so safe an, investment that it is actually /worth LI 17 in the market, as money is not wprfch 4 per cent, at Home. The company know this and do not want to p&rt with it, so negotiations ensue. Jbhn Smith 'wants that ii3o and must have jt, and his debtofTLiOO is bought fpr Lll 7, arid someone else buys a new ;bbnd pi Smith's for : 1i95 in the. LlOO; >v ?i P©r cont.j7whjchii(as the new j

buyer has to buy Lll 7 worth of. stock) now became L 123 3s*.3d. , Then the. interest on; it at .3£ per cent, is L 4; Is 6d per annum, and the debt, ; iristead of being one which will vanish in another 24 years, becomes a permanent one. John Smith has gained his point —has secured* his L3O in cash , and spends it probably in riotous living,, but he does not handle a shilling of the canversion monej. Now, this ison a small scale exactly what the Government has done on a large one. For LIOO read L 500,000, for the ; Ll23 of the new debt read L 650,006, and for the L 32 12s of sinking fund read. Ll 63,000, and we have the comparison complete with one exception. John Smith spent his few pounds in a discreditable way— debauch perhaps. The Seddon Goverment. spent their thousands in buying cheap properties , for themselves in co-operative public works and travelled through the colony banqueting, and telling their - gaping admirers that the'raoney was derived from surplus revenue. That, is the plain English of the loan conversion, told in a more; roundabout way in the parliamentary rocords.