THE BUILDING SOCIETY.

Southland Times, Issue 1594, 21 June 1872, Page 3

THE BUILDING SOCIETY.

SlB, — In writing my letter of 23rd May, my object was not to explain the working of the society, but to correct what I took to be the gross errors of your correspondent " Actuary"; but as " L.S.D." has impugned a portion of my statement, I trust you will grant me Bpace for a r«ply. Before touching on the points in dispute, I wish to lay down what I consider to be a basis, the points of which, though simple, are of importance in reasoning on the subject of this letter. A shareholder earns his profit and pays his interest. The amount of each year's profit credited may vary; tbe amount of interest (yearly paid in cash) per share, cannot vary. The profits yearly made are not received by the shareholder till his shares run out. A borrowing member occupies, in some respects, a double position, for it is as an investor that he reaps his profit, and as a borrower that he pays his interest, and, lastly, the fact of his having borrowed makes no difference as to the percentage of profit credited him. From the tenor of " L.S.D.V' fourth paragraph, I imagine that he misunderstands what is most clearly expressed by me in my seventh paragraph, for, in writing of me and my views, he uses the words " enormous interest," " supremely ridiculous," " frightful," ";not in earnoßt," Ac. I think, Sir, before going this length he should have made and shown some " calculations" to prove that I am wrong • but I will excuse him for not having done so, as in his first paragraph he writes — " calculations tend only to confuse the writer" (somewhat frank atleaßt!!) "and the reader," and it J would certainly be unreasonable for me to expect him to do voluntarily what would " confuse" him, and tbat too at a time he most required to be clear-headed. And further, I think it most disingenuous oi him to represent me as meaning

7 anything contrary to what he himself says, when he writes, " I will say further — the borrower pays no more interest the la9t payment of his last year than he did the first payment of the first year." Why, Sir, this ia the fact, and it is upon this fact that my whnle argument (vide paragraph seven of my last letter) is based. i~ say because he pays tlie same interest — viz., £8 a year — throughout the whole term, and that upon a regularly decreasing debt, he must of necessity pay a yearly (or fortnightly, if he likes) increasing per centage — not amount of interest on the balance. Now this is what " L.S.D." and " Actuary" deny, and what I am in earnest in adhering to ; but to make the issue quite clear, let us take the case put in paragraph seven of my last. I now ask " L.S.D." does, or does not, the shareholder owe £48— only P and does he, or does he not pay, as interest, for the year stated, £8 ? If he owes £48, and pays £8 for one year's interest on that sum, no man — who ia not " confused" — will pretend to say he paid less than about 16J per cent, per annum. The annual rate of interest for a series of years, at whatever varying per centage it may be, can readily be shown to be equivalent to a certain | average, or fixed rate for the whole term of years ; but this rule I have laid down does not affect the fact that during the last year a person may be paying interest at the rate of 77£- per cent, per annum (not on £100, the amount originally borrowed, but) on £6 Bs. the amount actually due. To give a case in explanation. A borrows £100. For one year he paid £3 interest, another year £10, and a third year £17 ; the average is £10 (or 10 per cent.) a year, but this average does not affect the fact that during each year the rate of interest was not the same ; the only difference — for the principle ia the same — between this supposititious case and the case of the shareholder is, that in the latter the annual amount paid for interest is throughout the same, but the amount of principal regularly grows less. " L.S.D.'s" aixth paragraph— l hardly think myself called upon to take serious notice of the question asked me ; he might with equal reason ask, " Suppose a fool to be a wise man, what then P" I would simply say in reply, "If he is a fool, he cannot be a wise man." (I have no desire to "birk this question, and could instantly show its Teak point.) I coulc point out several errors in " L.S.D.'s" ; letter, but as I do not feel called upon to do more than maintain tny own position, I will content myself with pointing out one which clearly proves i he did not " calculate." It is this, he (more than once) writes of " 4s per fortnight" as the subscription on " four shares." " Try again," my friend. I As " L.S.D." and " Actuary" have co carefully i avoided " calculations," and appear to wish the public co trust solely to their ipse dixit (or pos- i sibly to some merit there may be in their pseudo- ' nyms), I give the following, wbich I have prepared, and will be, 1 believe, found correct, save that I have omitted all very trifling fractions. They are based on the supposition that profits exactly cover working expense* — i.e., neither profit nor loss is made t —

p. 121 £i| 111 in stt if! ***i IP I;l: HI II 2 « a 4 A s Us «r s Xv B. D. I. &. S. L. 6. D. 100 0 0 8 0 0 8 percent 8 0 0 89 12 0 8 0 0 8 15-16 do 1 8 4 79 40 8 0 010 ido 668 68 16 0 8 0 011 ido 610 0 6880 800 13 |do 413 4 43 0 0 8 0 0 16 11-16 do 316 9 87 12 0 8 0 0 21 616 do 8 0 2 27 4 0 8 0 0 29 \ do 287 16 16 0 8 0 0 ,47 516 do 16 9 6 8 0U 18 6 77 ido 072 Yours, (fee,, O. 10th June, 1872.