THE FRENCH LOAN.

Westport Times, Volume V, Issue 858, 7 September 1871, Page 3

THE FRENCH LOAN.

To judge by the present state of the Bourse it is difficult to beiieve that France has just come out.of a disastrous war and a destructive revohr./on. Speculation during the last three day* has become as active as during tire feverish times fifteen years apo; the crowd is as dense under the Ccionna.des, the shouting as eager and ■energetic. Everybody wants to subscribe to 'the Loa/u, aud all the excitement is but an outward sign of the preparations which are being made for the purpose. On no previous occasion have the judications of coming success been more «oi»prete -or distinct, and, without going so far as to suggest that pure patriotism is at the bottom of the movement, it may fairly he admitted that the desire to pull the •country out of its difficulties is not diminished by the prospect of a premium. It is not, however, a mere prospect; the premium exists already. for the loan is largely dealt in at 83f. 50c, and is expected to go higher. The extent of the operation was &t first thought to be a possible cause of j difficulty:; an issue of eighty millions I ta one loan has never been seen before, and it was natural that prudent people should ask, a little nervously, whether so vast a sum 'could be got together at one sweep. All doubt upon that part ■of the 'question has, however, disappeared;; it is now evident that a much larger amount would be proTided if it were required, for the subscription has become European, and has assumed a character which may lie taken to indicate that the Loan is regarded everywhere with confidence. In my previous letters on the subject I have made observations ou the nature of the taxes which are proposed in order to cover the interest; but that part -of the'question may be put on one side for the moment, especially as it involves considerations entirely ■distinct from the Loan itself. What interests us now is to appreciate the probable effects of the present issue on the situation of France, and of the financial -scheme of which it forms part> 'the ulterior issues which it will be necessary to make are not likely to render that situation any worse, for they will doubtless be effected on much better terms, and will, at any rate, be postponed for three years. It results, from an examination of M. Thiers' speech on the Loan, and from the explanation I have received, that the policy pursued by the Government is to cut down as much as possible the amount of permanent loans, and to substitute temporary borrowings bearing low interest, and repayable out of income as quickly as possible. The £62,000,000 advanced by the Bank of France (including £8,000,000 not yet used) is to be repaid at the rate Of £8,000,000 a year ; £12,000,00© more has been raised on Exchequer-bills; so that £74,000,000 ot the cost K>i the war will never take the shape of Eentes. The sums which will remain a definitive charge upon the country are : 1. The issue taade 4iere last Julg, whic his supposed to r * have produced an effective sum of ... ~. ... £24, : 00G J 000 2. The Loan put out in England in the autumn, estimated to have brought in ... ... ... ... 7*500,000 (Neither of these amounts has ever been uxactly known.) 3. The pesent Loaa of £80,000.000, plus, say, 2 per cent, for expenses, dis* wunt, exchange, &o. v.. 81,600,000 * The future Loans to completethewarindfinaiity... 120,000;000

Total „. ... ..... £238,100,000 Or, in nominal capital, probably about £308,^)00,000. , It will at once be recognized how Mnitely better this position is than anything we have contemplated thus ■ft The permanent charge for interest on these four sums will be about £l2,7so,ooo—that is to say, £1,200,000 *n the July issue, £600,000 on the English Loan (these are M. Thiers' %ures), £4,956,000 on the present SQbscription (5 per cent, on *98,90O;OOO, which is the nominal capital of an effective issue of *80,600,000,at82£), and £6,000,000 f> say, 5 percent.on the £120,000,000 to be brought out hereafter. The consequence will be that instead of puig£32o,ooo,oGo effective by way of toajji and of paying interest on it as Kente, France will only borrow *-33,000,000 in a permanent form, and W 'U arrange the balance by temporary jljwances, repayable out. of income. <hs ia a very honest and courageous Hv of dealing with the subject, and *j J do not think it has yet been ©early recognized that such is the i* 3e '.l particularly inaiat upon it as J vm S the courage and wisdom with the .Government is facing its

difficulties. It is evident that the value of Freftch Stock will rise when it is understood that tho whole addition to the nominal debt of the country will not exceed £300,000,000, including the £120,000,000 to be brought out three years hence. Everybody has been prepared for an effective debt of £350,000,000, which would correspond (at an average of, say, 85) to a nominal capital of £400,000,000, and would absorb a mean annual interest of £19,000,000, at 5£ per cent, all round. Instead of this the nominal total of the War Loans will amount to £100,000,000 less, and there will be ah economy of £6,000,000 on the interest. It is true that at present there will be no diminution of the £23,000,000 of new taxes • on the contrary, tbat amount will be rather augmented than lessened by adopting the principle of immediate amortisation of £74,000,000 of the outlay; but from the point of view the security of the new Loans will be increased in proportion to the reduction of their amount.

These considerations are of a nature to develope still further confidence in the present issue, and as they cannot be weakened by any doubts as to the realization of a national income amply sufficient for all needs, it may be expected they will exercise much influence on the re-establishment of credit. It can scarcely be otherwise, for the position is so much better than was expected in consequence of the substitution ofa Bank loan of £62,000,000 at 1 per cent, per annum, and of £12,000,000 of Exchequer Bills at 4 percent, in the place of £74,000,000 (which means £90,000,000 nominal) of 5 per cent. Eentes, that eyery one will instantly see the importance of the saving thus obtained and its influence on the value of French Stock.

The question of Ways and Means will come on again afterwards ; and there, I think, M. Pouyer-Quertier will be found to merit less praise than in his management of the purely financial part of the operation; but the Loan, regarded by itself, has been admirably managed ; it has been reduced by skilful handling to a total far under what was anticipated, and it may really be said that.the success which it seems likely to attain has been legitimately and fairly earned. The project of law* indicating in detail the composition and anticipated results of the proposed taxes, has been published; it fills 17 newspaper columns, and, therefore, will require some time to examine and even to read:; it will not, however, for the reasons already given, exercise any influence on the Loan.