1915-08-07 — Page 8

THE HONGKONG TELEGRAPH.

THE WAR LOAN,

SPECIAL FACILITIES FOR CONVERSION.

FIVE SHILLING VOUCHERS FOR THE POOREST.

j

The first surprise in Mr. Mo- remainder for the purposes of Kenna's speech on the introduc. conversion. tion of the Loan Bill to-day. saya Coarols now stand at a mini- the Western Daily Mercury of mom price of 86. An investor July 22, was the announcement of £100 in the now loan may that it is to carry interest of four count £75 Console as half his in and a half per cent. There was vestment, which works out at 663 a subdued exclamation from all për cont. The holders of parts of the House at the unex- annuities also are provided for. pected generosity of the terms, It was renewed when the Chan- cellor stated that although it is

to be raised is left indefinite.

Why the Loan.

The financial situation natural

'A Popular' Scheme.

been dealing with ordinary issues with 100 as minimum.

l

These vouchers, when they have

EXTRA

HONGKONG, SATURDAY, AUGUST 7, 1915.

the

what fine.

said, the effect of the issue of any price below the minimum of the Committee. As I have just If the restriction upon dealing at 44 per cent, loan is to depreciate were removed, lam afraid Con- the price of other fixed interest sole would not stand at that figure. bearing securities, and foremost They would be many points be

to

osuse either of these sume might to raise 300 or 400 millions, be- prove to be insufficient to mrak the demands of those who desire to convert. Consequently, abnor mal as this feature is of raising

finite limit, it is, insbe loan without a circumstances, far more prudent to adopt that method. In this conver ion we are giving to the old stock-holders what is technically

ly had first place in the speech, though soms members were in receipts over borrowings amount it does not fall das on a very early:] may rely upon it that every effort exchangable at the price of 661. new issue comes in the old sub-

While there is a

cessive.

per cent, and of detailed matters 6732,000. The expenditure to one hundred millions, but we re- of business of that kind which day is very nearly three millione quire many hundreds of millions, so an a unit. What is true of I speak of $100, but I only do may leave upon the minds of those day, and it is rising. We have, and it becomes obvious-I think $100 is true of 65 and of 25,000, who listen to it the idea that the therefore, to make provision for it must become obvious that if 000. Bat for the sake of the cal- grest political consideratione be- deficiency which is now already with our old War Lean the invest culation I take the sum of $100 as hind have been overlooked. I upwards of 24 millione, and which or can already get rather better the unit: hope, however, the Committee as the monthe go by must ap than 42 per cent, you could not will read into every sentence Iproach, if not

The holder of $100 of old War uss that there is behind all these millions.

surpass, 2 expect a new issue, by which it ie Loan subscribed for the stock at business arrangements an urgent

hoped to raise many hundreds of 595: We say to him that if you With these facts confronting millions, could be floated at lese are the holder of £100 in the new appeal to the patriotism of the us, unless we issue a loan, the than 4 per cent (hear, hear). War Loan you shall bring country to make use of ita gigantic only method we could adopt to financial resources in enabling us pay our way would be by a con- cannot like issuing a loan at a you paid $95, and £5, making known as an uncovenanted bene-

Needlees to say, the Treasury $100 of old War Loan, for which and our Allies to carry on the war finned and indefinite issue of high rate of interest, and we are £100, and you shall convert the Bt. In this new issue we propose to a successful issue.

Treasury Bills. We have already fully aware of all the objections 8100 of old War Loan into £100 to give the subscribere a covon A Deficit of £518,000,000.

adopted that method to the extent not only on the ground of the stock of new War Loan. It re-anted benefit. We undertake that What is the ground for an im-

of borrowing 235 millione. lisbility to meet the interest, but quires, perhaps, a little calculation in any new issue made in this mediate issue of a loan? Let me definite, issue of that kind of upon other securities to a new to work out what that means. But of this war other than Treasury There are objections to an in- also on the ground of the effect upon a piece of paper for anyone country on a loan for the purpose give the Committee briefly two or three figures up to the end of last security. In the first place, loan at so high rate. But the this in an offer which gives sale bills or short-date loans we will March. At the close of the fast-rosury Bills have a habit of overwhelming and cardinal fact is able rights to the old War Loan ake the stock of these war loans ciel year the realised deficit falling daa, and they are most that the State has got to raise the holder, so that any holder who has for cash at par. That means which means of course,

likely to fall and not to be renewed money, and it is no good putting not himself the money to gabsoribe that if in any future loan it may amount by which cur expenditure at the very time when, owing to forward terms which would leave to the new War Loan will be able become necessary to pay a higuer Up to now the Chancellor had exceeded our revenue bad reach. the financial conditions of the mo- in doubt the successful issue of to sell part of his old War Loan rate of interest than dy per cent,

ed a total of 384 millions. Since ment, it might be most inconveni- the loan.

with the rights, and with the the holder of this stock should be not to be unlimited, the amount through the Bank of England March 31, and down to last Satur: ent to find the money. In the se- These are the first features, but money which he so boquires con entitled to the higher rate. Ha

day, there has been a further oond place, by means of Treasury there are several other factors of waft the balance of his old Loan.

would be put in the same position Another salient point in a speech cheers met his disclosure of the realised deficit of 184 millions. Bills we borrowed bankers' money, very great importance which I

Console to-day stand at what is if he were aubsoribing for the of great ability and remarkable scheme by which the Post Of The two deficits together give us and not publio money. I know shall have to bring to the notion called the minimum price of 66. new loan for the first time. olarity of explanation was the will issue bonds for £5 or £25, the amount which has to be made money and public money is some a total of 518 millions, which is the distinction between bankers'

Generous Terms saheme, rightly described by Mr. and vouchers for five shillinge or

that these terms are generous- Ithink the Commi tee will agree McKenna as ingeniona and pro- any multiple of that amount will good by receipts other than

After all bankers' money is

(cheer)-and that they ought, if a tical, by which all classes will be be issued through the Post Office, revenue.

We have made provision so far public money by one remove, but

proper appest is made to the coun able to participate in the new land; if desired, through Trade

there is a very real difference be in our mind amongst those securi-low 66, but after the issue of ry, to be effective in raising the loan. The investor of five shill- Unioas, Friendly Societies, and to meet this deficit by various tween the effect of borrowing from ties must be the old War Loan this loan, which gives 41⁄21⁄2 per money we require. In the last

borrowings. The first War Loan. inge is to enter on substantially works offices.

in November laat was for 331 the public, and borrowing from (hear, bear). Five or six months csat. interest, Console if left to loan Ihave no doubt that when the same terms as the millionaire.

There were few opportunities accumulated, can be converted millions. We have issued Er the bankers. If the public bought | ago the public were appealed to themselves must inevitably fall considering whether they should" for oratorical effect in a speech into £5 bonds. Their issue at chequer Bonds to the amount of Treasury Bills, and would be certo subsoribe their money to the still lower (hear, bear). We say not invest in it many persons with which necessarily consisted of five per cent, is qualified by the 48 millions, and we have farther (ain to renew them when they be State. The effect of this issue st to the Consol holder if you apply whom the basiness faculty was figures, figures all the way. The fact that broken days will not gold Tresaary Bille to the total of came due, we should be willing 4 per cent., when the other war for £100 of the new losn we will perhaps, over-developed with? 235 millions. These three items to go on borrowing on Treasury loan was issued to pay only 4 per allow you to convert £75 of Uou the idea that if they waited a litle Chancellor thought it worth while count. to assure the House, in opening, Finally, Mr. McKenna delivered together give a total of borrowings it throughout the war," but cent. interest, and now at Its pre-sols into £50 of the now War there would be another issue at a that his concern with percentages an effective little homily on the amounting to 614 min the doma. We want the public to lend the send down the old War Lan, he will be entitled to convert by thought they would be doing just neither of these conditions exist. sent price pays only 4, must be Loan. Any one who converts and higher rate of interest, and they and other technicalities did not familiar theme, "Now's your this total, however, in these daya argue any blindness to the desper time." He pointed out that in a comparatively small item, six-money, and we want the money unless something is done to help the possession of the new War aa much service to their country issues involved, Bat so much any future loan the present loin teen and a-half millions, has to be sent in a way which will not the holders. I hope it will stand Loan-anyone who desires to con- by deferring their loan. Thors was obvious from the whole spirit stock would be accepted for cash deducted for Exchequer Bonds, oblige us to pay it during the for over as a maxim of British vert and has $75 of Console, will prudent people made a mistake Governments that this country be able to exchange it for £50 of because they had been walching of the speech and the principles at par, so there was no prudence raised to meet part of the loan course of the war.

will never leave its creditors in new War Loan. Those who make their money for the last six borrowed for the South African animating the scheme.

in waiting.

The Terms Offered.

the lurch (hear, hear)and that the calculation will readily appre mouths getting nothing like the These are the advantages which thous who have lent their money ciste what that means. The reception of the scheme War, which has been paid off. was, on the whole, favourable, There is, therefore, a balance of a loan offers. In the first place, on the faith, of British security

rste of interest they would havO It means that we make Console got on the loan, and when the ing £587,448,000. Oom- date. In the second place, five hundred millions to be made

mittee will remember that the borrow public money by means of good, apart from revenue, the Sir Frederick Banbury confess Saturday was 518 millions, and will not pus it higher to reduce we propose to give new rights should offer for the new War Loan as regards future loans, the total realised deficit up to last a loan, there is a tendency-I • New Rights to Old Holdern, getting this advantage is that he position of new subsoribers. But amounts raised by borrowings ed to misgivings 立庄 One exceed this by about eighty mil- of the old financial school, and there would seem to be a surplus expenditure on consumption be to the old, holders of War Loan just as in the case of the old War argument for waiting is absolutely lione. Why, then, the present Sir Thomas Whittaker was ap-There are, however, two facts to pay in his holding by saving: those rights are in a moment, bat holder of the stook which he would | can say that ever again à Minister canse of the effort of the investor(hear, hear). I will state what Loan. We will relieve the Consol gone. Now is the moment. Who loan 7. the Chancellor asked. prehensive of the effect on savings

"It is," as he explained, banks.

which we have to take into account In the third place, largely due to before I do so I want to mention inevitably have to write down, will stand here and offer the "necessitated by a daily expendi-: From several members came before we can properly regard this other reasons, the issue of a large another secarity. I want to men-

and which would probably be public a chance of subscribing at payment to the Bank of England of money should be raised by for the purposes of the war. In reasons the Government have as that for the old War Loan hold of his Console for the purposes of we have to appeal of a higher ture over income and by the re- the plea that a larger proportion money which we can freely spend foreign exchanges. For these sols holders is not quite the same him in exchange a new and high United Kingdom? If our re surplus of 80 millions as loan has the effect of assisting our tion Consola The case for Con- almost unsaleable, and we give 45 per cent, on the credit of the ly marketable security, the price quirements become greater, and Mr. Chaplin praised the Chan-avery considerable liability to loan.

the first place, the State has now decided upon the issue of a new ers. We speak already of the cellor's speech in a couple of the Bank of England, Supported

November loan as the old War exchange being reckoned at rate, aubscribers get the advan- eentences and four consecutive by a Government guarantee, the We propose that the loan shall be holder is, nevertheless, very strong What are the terms proposed? Loss. The case of the Consol

661.00

tage. adjectives.

For the 21 Annuities the price for us, sa prey God they may and If things go on favourably Mr. McKenna's Teply made it Bank of England has made ad- iesued at par and shall carry in (hear, hear). Most of us forget is 878: We takes £78 of stock for another loss should be regained, clear to critics who had appealed others to enable them to meet bills that the State shall have the right Console were issued to pay for the Annuities we take 267 of stock for Therefore, I sppeal with come vances to accepting housce and terest at 4 per cent. We propose that upwards of 30 millions of £50 of new War Loan, sad for 22 it would not be at this rate. end of the war it would be down to Gladstonian teneta that the and other liabilities in the manner to repay the loan at par in 1925, South African War. Another £50 of new War Loan. The only confidence to the investor to take. to fifty. It is already under that Treasury will not neglect to impose described by my predecessor last or at any subsequent date. We fastor.we must not overlook is that one other condition I must men- advantage of the opportunities Munitions stated that the liability be entitled to have his money back point of unsalenbility, of Console is that the application must be freely and liberaly to the neede propose also that the leader shall the depreciation, almost to the tion with regard to this conversion afforded to him, and to enbaeri he as against the indefinite issue of Treasury Bills. This was based The Chancellor of the Exchequer at that time was 120 millions, and in 1945. The loan is, therefore, is not in the interest of the com-made before the 30th October this of his country. This is a great on two grounds: Firstly, that the (Mr. McKenna) said: I rise to move he estimated that before the end repayable in ten years. It must mersial community as a whole year latter represent bankers and not a resolution enabling me to in- of the war that liability would be be repaid in thirty years. The (hear, hear). I do not speak only The Elfect of Conversion. public money, and have the habit troduce a Loan Bill. On the 17th reduced by payment of bills, instalments of the loan will of the holders, but of the rain and What will the effect of this con- of falling due inconveniently; November last my Right Hon. debts, and otherwise to 50 mil-cover the period from application bankruptcy which a heavy sudden version be? There are now Con- I have spoken so far of the and, secondly, that the loan has friend the present Minister of lions. As a matter of fact, I am ap to October 26, and the first fall drop of Console would entsil, sols held otherwise than by public terms and conditions of the RRUG expenditure by inducing holders for £350,000,000. Large as that able to state that that liability is on December 1. These are the terest of the State sa far as pos- tween three and four millions. If land. The minimem subscription the advantage of reducing public Munitions introduced a Loan Bill in the fortunate position of being half-year's dividend will be paid These are evils which it is the in- departments amounting to be on a loan from the Bank of Eng- to pay for their holdings by say-loan was, and notwithstanding already well under fifty millions main, simple features of the loan, sible to avert. We propose, there the Console were all converted it will, as usual, be £100, but in our other methods of borrowing which (cheers) and in that fact we which I hope, will recommend fors, to give the Consol holder a would mean an application for at present proposals we do not con- The new loan, which is to be have been adopted, the time has have the strongest testimony to themselves in the Committee. similar opportunity of retrieving least 400 millions of the new War fine ourselves to that issue--(bsar, legued at par, is repayable in ten soms when the necessity for a the wisdom of the measures The first question that must be his position as that which Loan, because Consola can only hear). We propose three methods years, and must be repaid in further loan becomes apparent. adopted by my predecessor at the saked is: Why issue at so high wo thirty. Its high interest is justi-As soon as the necessity was es / time of the crisis inst -August: Ƒn'rate of înterest as 49 per cent.?" War Loan the old be oɔnverted if the holder applies of issue to meet every o seg und'. fled by a reference to the fact that tablished the Committee will We propose to take over this Looking back nearly twenty years, add, in order to make the circle ate amount. In the same way, if of England in the way that |_ holder. I should for the new Loon in a proportion every purse. First, from the Bank the stock of the last loan stands at agree, I am sure, that it was in liability by repaying to the Bank and remembering Console stand complete, that we do the same for the conversion is made of the everybody stready understands. four and a-quarter.

the public interest to come to a of England the amount lent ing at 114, anyone looking forward the holder of the 23 per cent, old War Loan into the now an ap- Becondly, in order to meet the This led Mr. KeKenna to the prompt decision. It is most against these bills. The policy to an issue a 4 would think it and the 24 per cent. Annuities, plication for some hundreds of useds of the small investor we question of the holders of, that ondesirable to have a big loau of the Government ought to be to an impossible dream. Those who Thas all the creditors of the millions will have to be made of propose to provide for the sale of stock and of Console, Cheers as hanging over the market. It is reduce its debts direct and in twenty years hence looked back United Kingdom are remembered the now atcok. We cannot expect 65 bonds or £25 bonds through sured him of the members' ap. far better, seen at the risk of direct to the Bank of England, so at this loan at this price will, ac and something is done to help that all the holders of Console and the Post Office (hear, hear) TO proval when he laid it down as a some inconvenience, to take an 8 to leave the Bank as free as cording to whether they have sub them. maxim that this country should immediate decision to bring out possible to carry out its time-soribed or not, regard it either mu

old War Loan will convert. Many bonds will carry precisely the Irish land stock is held under will not think it worth while, same rate of interest and advant- never leave creditors in the larch the loan forthwith. The House onoured duty of watching over a golden or a lost opportunity entirely different circumstances. Many will think the transaction too ages as to conversion which attach He held, too, that depreciation of has already given leave to take the exchanges and protecting the The Government will have to face Now, sir, what are the terms we difficult for them to undertake, Console almost to the point of un- both stages of the resolution to country' gold reserves. When the situation of to-day, and there offer to the ordinary investor? We and some persons may not be able saleability was not in the interest day, so that the Bill may be intro-less and other liabilities to the are two great facts which we say "If you bring £100 we will to find the necessary money. of the Community.

duced at once. By adopting Bank have been paid off the large cannot ignore. Holders of old war stock are to this course, if the House apparent surplus will be to a great Those who think 4 in too par, carrying interest at 41 per se to how many holders of old Dar give you £100 of new War Loan at There is an element of uncertainty be allowed to convert it into new sanctions the resolution the extent extinguished. high and an extravagant rate of cent. In the owner of Comols War Loan and Consola, will con

Our Growing Expenditure. loan at par. The conditions of Bank of England will this conversion are that purchasers bo able to issue the prospectus for bear in mind in justification for price, allowing for interest and ner War Loan we will take your mates it ahwise and

The second factor we have to that she old war loan at its present you bring $100 and invest in this Every element of uncertainty

interest must first of all remember and old War Loun we say. If vert of $100 worth of new stock may the loan to-night, and applications baya 8, second £100 worth in re

can be received to-morrow.

an immediate loan is in the daily the value of redemption, pays the old War Loan at the price of issue to fix a limit to the amount of the unwise and imprudent excess of expenditure over reven investor not less than 42 per cent, and convert it into new War Loan loan. We are not seking for any If we anume that the and that loan stands at a discount, as if it were caah We will con- definite amount. The only limit revenue comes in at an equal rate The second great foto bavo vert on thone terms your per will be the limit in the resolution is that we require, cent loan into 44 per cent; to meet the expenditure of the

could not say we wish

of amounts lent on bills.".

in this respect Mr. McKenna was able to make an intereating announcement. Mr. Lloyd George, speaking in November; when Tiability stood at 120 millione, ex- pressed the hope that before the

taxation.

taxation later.

Jum,

It remained to justify the looo

Chancellor of the Exchequer's

Speech.

ings.

turn for £100 of old stook, which In introducing this proposal was issued at 95 per cent., plus 25. shall have to use the language of An investor may sell some of commerce, the language of hui- his old stock to ampplement the mess. I shall have to talk of rates,

I

of 80 millions still in hand.

Minister

November. The

of

the daily revenue would be not are, tea, Efteen, or thy; or day by day throughout the year

national appeal to every class for

a great national purpose (hour, herr).

to the issues through the Bank of

Englas

(To be Continued

from the

June 21: