CONSOLIDATING LOANS.

Otago Daily Times, Issue 11797, 28 July 1900, Page 9

CONSOLIDATING LOANS.

TO THE EDITOR. g lEj —The question postulated is whether the public creditor does, or does not, get the bonus? It.is an open secret a scheme will be early formulated for consolidating our various municipal and ' local loans. Hence this inspiration. Now, our. ' experience in the past—colonial, local, and,. municipal—• has certainly demonstrated conversion b\isiriess to be a gamble and.all in favour of the creditor. No one can tell what the interest and price of money will be a number of years ahead, hence the speculative gamble. ± . Those of us who remember Sir. Juliu| Vpgel's finance, also remember his great consolidation scheme and with what an ethereal flourish he went to England and gave effect to the same. Few of us, however, know what the creditor gained and the taxpayers have lost. The conception (conversion) was based! on the assumption that money would never go below 4 per cent., and if we got rid of the old 5 and 6 per cent, and gave the 4- per cent., the colony would be the gainer. A' greater blunder was never made. By so -doing£l,6oo,ooo was added to the principal of the debt, whereas this amount would have been saved to the colony had the old 5 and 6 per cent, (interest) been paid till the loans runi out. A lot of them would now be failing: due. We not only lose this amount, but pay 1 per cent, more than we should do for 30 years. We have also lost another £4-38,000 in converting five millions of old high-priced; loans into 3j- per cent, stocks which is not repayable till 1940. ■ ..." Now for our Dunedin bonds. Holders'of 5 and 6 per cents, must have an equivalent, given thenl for accepting 3's or 3^'s. This is done in various ways, but generally by cash.' payment. The various 6 per cents, are falling due on the following .yp»'rs:—£9Booj 1903; ' £18,400, 1905; £99,600, x9o6;—tofaij £127;800: . The water, £109,100, and Massey fraud/ £3300, completes the list of 6 per centl: bonds, "but the two last-named are not due 'until 1925, which makes the full ■' total £240,200:; '' . "

I haven't the London price for these 6'sj but they should be worth from £125 to £130. It is for those advocating conversion to show the gain to .the taxpayers, say, By. issuingA3 per cents, -with a 30 years' currency, Jjeanng in mind, of course, the cost during the currency of conversion, brokers' charges, etc. TKe price of money is so very sensitive, and! the public having a preference for appreciating stocks, a further.consideration has to be made whether it may not be absolute folly to think of conversion at all, but simply pay the old rate, as the cost of saving in interest has teen clearly demonstrated to be a very, expensive luxury for our colonial loans.-* I am, etq., '• ■ • ■

Feedk. Maliard.