[Rudiments sheet]

20 Decr 1799

Annuity Notes

X. Brouillon

[003-006b formerly attached here, covering blank column]

Effects Individuals Borrowing

Period 5

Money would then be more difficult to borrow than now, since a man would be able

to make but 2 per Cent and that precarious more than he would make to a

certainty without lending.

Effects upon mercantile dealings ready money or bill of Exchange By giving credit

a man would make only 2 per cent by his forbearance more than if he had sold for

ready money

As some will be accepted out of the funds by the rise of price, so others will

be deterred from buying in: These will be driven either to lend their money to

individuals (chiefly in trade) or to embark in trade themselves -

The latter effect will take place principally, the utmost interest being now but

2 per Cent

to lib IX +

Extent

Effects Period II

The payment of the interest[?] on the small fractional notes, if paid separately,

would be very troublesome, but before they are issued in such abundance, it will

be established by experience, that the interest will not in general be demanded.

In as far as people hoard at compound interest, such hoarding will contribute in

a great degree to render it scarcer and scarcer, as compound interest can not be

made otherwise.

When the demand of the small and temporary annuitants comes to have been

supplied, and the large and permanent Annuitants upon being paid off

involuntarily[?] buy Annuity Notes immediately upon the paying off of this

Stock, then the currency receive no more addition from the encrease of the

quantity of this paper.

Effects Period III

When the conversion has been compleated, as the paying off plan goes on, the

demand for Anny Note paper for permanent income will become greater and greater,

and as at so much as is so employd is taken out of the currency, the quantity in

currency will thus grow continually less and less.

Period I

+ As there will be less lending, there will be less loss. One reason perhaps why

Bankruptcies have not encreased by the War, the high price of Stocks having

diminished the lending to individuals.

War & Peace

The longer it is before the forced paying off plan takes place the longer it will

be before the augmentation given to the currency in circulation will cease.

But the longer the war continues and thence the practice of raising money, the

longer it will be before the fund[?] paying off plan

commences

Effects Period I

War &Peace

commences. Therefore the longer the war & continues the greater the

quantity of additional currency that will be poured in - which is just what is

desired. It will add /yield/ most money when money is scarcest - least, when

money is most plenty.

If the war should continue so long that the demand of the temporary and part[?]

annuitants is supplied before 3 per Cents have been raised to near par so as to

bring Annuity Note paper within the demand of the large and permanent

Annuitants, the issue will then slacken, and what there is of it going on in

each year will be no more than the produce of the small savings of the year.

If The quantity of currency thus added be equal to the quantity of capacity of

labour remaining unemployd, this is quite sufficient: all above[?] would do

rather harm than good, by sinking the value of money, that is raising the price

of goods.

[Next section formerly obscured by 003-006c]

{ As nobody would take out the Silver recte currency in single notes with a view

to the interest, encouragement to take it out might be necessary - viz:

1. Stoppage of larger Notes. or

2. Allowance for taking out small notes. or

3. Light silver taken for its denominative[?] value in exchange for Silver Notes.

The silver and small Gold Notes should not be issued singly, but only in

quantities amounting to the Standard Note?

So in regard to payment of interest.

Government might reserve to itself the option of composing the amount of each

such Standard Note issued as it thought fit. Power to the Bespeaker however to

make known his wishes in that respect. }

Effects Period II

When the whole of the Stock Annuities has been converted into Note Annuities When

Note Annuities have absorbed the whole of the Stock Annuities, so that there

remain no Annuities but the Note Annuities at Market, the steadiment will be

gone - they will of course be liable to Agio as stocks are at present.

In the ordinary state of things, as accumulation continues, and thence the demand

for these means of accumulation, they will experience a gradual rise. The paying

off plan will encrease that rise.

In case of a war or preparation for war (it being a time of peace) then of course

they will fall - in proportion to the quantity of Stock supposed to be about to

be created.

Effects. Period II

{ The Annuity Note paper could not fail of filling up the gap created by the

expulsion of Bank & Bankers paper since it is only in proportion to the

preference given to the Annuity Note paper that the expulsion will take place. }

But when the steadiment is gone, and they become susceptible of an Agio, that

Agio will be rise merely[?], exempt from all danger of a fall below the mark

from whence the rise set out: the only danger they will remain exposed to in the

nature of a fall, will be that of being made to undergo a forced reduction by

the threat of being paid off and this danger will not at the opening of the

market, nor for years afterwards be likely to appear a probable one, so as to

diminish the propensity of coming to the market.

Effects. Period I

War & Peace

It is the property of the paper to answer the purpose to perform the functions of

Stock and money both together and immediately. War time creates an encrease of

Stock that is /and thence/ of Stocks & money taken together. War time

will alike[?] by creating an encrease of Stock will create an encrease of this

paper in proportion as it goes for the buying in of Stock. Thus it is that War

time will create an encrease of this paper of Stock and money /currency/ taken

together - and as the demand for an abstention[?] to Stock will not encrease in

proportion, the encrease produced in war is left to take the shape of money

/currency/.

It thus produces /affords/ most money when money is most wanted - it affords

least money at a time when an influx of new money would be prejudicial by

depretiating the old, in other words by raising the prices of commodities.

Plenty can not depretiate it: be-

cause

Effects Period I

War & Peace

-cause in the nature of things it can not but be preferred to ready money: and

because it can not be brought into existence but in proportion as and so long as

it is actually preferred to ready money.

The difference is that this converts capital into means or encrease into capital

[…?], and without producing depretiation on either part. Whereas Stock Annuities

can not be sold out in large quantities at once without a proportionable

reduction in the price.

A Note-Annuity holder has at every moment at his[?] option, either to keep his

annuity, or to dispose of it without loss.

nd [wm 1798]

2

Sinking Fund Fiction

succeeding Loans. But, the war-mode, designed for the

establishing a fresh fund for the redemption of the debt about to be created in such

War Years, (or as they might be called, No-surplus Years) as might thereafter ensue, was not

extended and applied to the administering, during such future War-Years or No-surplus Years, the masses of supply allotted to the then

already-existing Fund established in a Year of Surplus. The

consequence was – that, during all such No-surplus Years,

the Old part of the debt was left to be supplied in one way, the New part in another:

the New part, in a mode suited to the time; the Old part in a mode not suited to the time: in a mode so far from being suited

to the time, as to be in effect not practicable, though by the continuance of the same forms, the impracticability of it is screened from view.

Was the disparity in question the result of oversight, or reflection /{design}/? -

If of reflection, it must be that the benefit derivable from the correction of the

error, did not seem worth the trouble.

nd [wm 1798]

+ {But whether this particular million be so obtained or not, makes no sort of difference. So much as is thus obtained, so much is taken forth from what would otherwise be applied to the current service of the year, so much as is thus taken from the current service of the year, so much must be borrowed, to replace it. }

{ In war time there is one mode, and but one, in which what is done in appearance, might be done in reality: and that is by raising within the year the whole amount of the supplies. I say the whole amount: for even if the whole of the money wanted for current service were raised by taxes within the year, and there were but a single million raised by loan, the final cause of that /the resulting/ loan would evidently be the demands of the Sinking Fund, and the appearance of liberation would be as illusory as if the whole of the money raised for that year had been raised by loan. }

nd [wm 1798]

3

Sinking Fund Fiction

{ In a year of peace – in a year actually affording without loan a surplus to the

amount in question, the mode suited to the season would be resumed: and thus to the

effect produced by the appropriation of the attendant annuity resulting from the

application of so much money employd in the redemption of

capital of the debt, would be added the following, viz:

1. Two Million would be struck off from the amount of debt remaining to be redeemed:

whether in the way of buying in or paying off.

2. That same amount would be deducted from the quantity of Stock remaining as a load

upon the upon the market, and thence contributing to keep down the price: in other

words to raise the rate of interest which it will be necessary to give for such money

as comes to be borrowed.

In a year of war, on the other hand, if the value of a single million be raised for

the war, no such defalcation can possibly be made in that year from the amount of the

debt: because by the supposition, the very sum you pay with one hand, you must either

have borrowed already or borrow immediately after with the other: which to the amount

of that sum, comes to exactly the same thing as if you neither paid nor borrowed.

True it is that even in time of war, the Annual Million is not raised by loan, but

only taken out of the Unappropriated or Surplus Sinking Fund, and thrown into the

First of the Appropriated ones. +

But neither is it the less true, that so long as in any one year there is so much as

a single Million raised, this appropriated Million is the cause which necessitates

the raising of the supposed occasional million. In any given year, if after

application of this appropriated Million, an occasional Million would be wanting for

any other purpose, and that Million to be raised, as before at 6 per Cent, and if the

allotment of the appropriated Million be omitted for that year, and in lieu of it

there be created a perpetual Annuity to the amount of £60,000 a year, the occasional

Million wanted for the current service of the year will be free to be so applied, the

raising of the Million of money within the year will thus be rendered unnecessary,

and the provision really made for the redemption of the debt will be the same as if

that Million had been raised within the Year, according to the letter of the existing

Act.

So much as to the appropriated Annual Million: and the customary £200,000 stands

exactly in the same case.

nd [wm 1798]

3

Sinking Fund Fiction

In a Year of Peace (it being supposed a year actually

affording a surplus to the amount in question) the mode suited to the Season might,

and naturally would be, resumed: and then, to the effect produced (as above) by the

appropriation of so much perpetual annuity, as above, (rate of interest, for

simplicity of calculation merely being supposed the same as in the above supposed War

year) would be added the further results following, viz:

1 Neat Quantity struck off from the mass of National Debt due to

individuals 2,000,000

2. Neat defalcation from the quantity of marketable Stock, capable of

contributing to the load on the market &c, as before 2,000,000

In a year of war, if a single Million be but borrowed for the

war, neither of the above effects can, in the nature of things be produced:

because, by the supposition the very sum you pay with one hand you either have borrowed already, or immediately after will have to

borrow, on that account, with the other: which, to the

amount of that sum, comes to exactly the same thing, as if you had neither paid nor borrowed.

One supposition there is – and but one – on which in a

War-Year or other Year of deficiency, to an amount equal to or exceeding the million

it is possible in the nature of things to make a neat defalcation to the same amount

from the mass of national debt: - and that is, if of the whole amount of the extra

demand for that year, after reservation made of the Million, be raised within the

Year viz by taxes with or without other resources, but without borrowing.

nd [wm 1798]

4

Sinking Fund Fiction

Heads of argument: suggesting the inconveniences resulting

from the present mode, and consequently the advantages derivable from the proposed change.

I. {Specific} /Pecuniary/ Losses capable of being liquidated –

1. By Subscriber’s profit every year upon so much money raised or so much Stock

created. ----------------------------------------------------------------------

2. By expence of Bank Management: commencing upon the creation of the Stock, ceasing

as soon as an equal quantity has been bought in ----------------

3. By difference (if any) in point of interest between the day on which the first

dividend in the Stock thus created is paid,and the day on which the first dividend in

the Stock bought in with the money is received

4. By allowance (if any) to the Bank for receiving Subscription Money upon this part

of the Loan ---------------------------------------------------------------------

II. Pecuniary Loss scarce capable of being liquidated.

5. Extra-Load on the market, viz: at the time of the contracting for the Loan,

{though removed afterward, and the removal foreseen}: thence, extra-price paid in

Annuities for the money produced by the rest of the Loan.

The load (it may be said) is removed afterwards, and the removal is capable of being

foreseen and argued upon at the making of the Contract. - True: but still the state

of things is not altogether as if there were no such load. The guess – the erroneous conception – presents itself to a certainty, and at all times: the

pressure of the corrective observation is but occasional and precarious.

nd [wm 1798]

6

Sinking Fund Fiction

Note

From the form thus given to the allowance made to the Original or Peace – Sinking Fund, the allowance to the War Sinking Fund, receives, in an indirect way, an encrease: because as the money raised in each war year to produce the allotment to the Original Sinking Fund for that year, is so much added to the total of money raised for the current service of that Year, the one per Cent perpetual annuity upon that part comes to be added to the rest.

The amount of this indirect addition is not inconsiderable: as for example

Assumptions -

Allowance to the Original Sinking Fund in each given War Year (appropriated Million and customary £200,000 together) amounts to 1,200,000

Rate of interest on that year’s loan

say for the sake of round numbers 6 per Cent.

Capital created at that rate £2,400,000

Result –

An annuity of one per Cent upon that capital amounts to £24,000

Was this indirect addition intended? – If so, or if upon observation it should be thought fit to be continued, it would be easy to continue it in the direct mode.

nd [wm 1798]

Note

Annuity Notes

1

Sinking Fund Fiction

Superseded –

{ On this occasion it becomes necessary to the purpose of the proposed plan to bring to view an observation which setting aside the proposed plan may have its use in the existing order of things. This is, that the mode in which the existing Sinking Funds are constituted, involves a fiction, and that a sort of fiction which besides the complications confusion and obscurity of which /with which/ all fictions in matters of law and government are inseparably attended, is moreover productive of /attended with/ a mass of unnecessary expence.

To the sums added /borrowed/ in each year of the war for the defraying of the charges of the war are added in each year other sums borrowed for the purpose of being applied to the reduction of the aggregate mass of debt: “ borrowed” (according to the familiar proverb) “ of Peter, to pay Paul with.” Were this all, the operation would be nugatory upon the face of it. It would in fact be nugatory if upon paying off a quantity /mass/ of principal money or capital equal to that which has been borrowed for that purpose, the debt were extinguished, and the payments which otherwise would have been to be made on the score of interest, made to cease. This however is not the case: the debt instead of being extinguished, the debt with the interest belonging to it is transferred to the Agents of Government, the[?] Managers of the Sinking Fund. What then is the simple state /truth/ of the case? the real result and advantage of the measure? The capital of the Debt, meaning the aggregate mass of the National Debt, experiences at the best no reduction whatsoever, at the time:

but }

nd [wm 1798]

Note

2

Sinking-Fund Fiction

{ but an annuity, equal to the amount of the interest of that /the factitious/

capital (supposed to be borrowed and paid off) is created the amount thereof to be

annually applied to the Fund in question /meant to be […?]/ for the composition of

which the operation is performed /intended/.

But since the interest and that alone is what the fund gains by the measure, why not

grant the interest at once, and that alone, without mention of the principal? 1.

Fiction with its attendant obscurity would be saved – which of itself is a great

gain. 2. The market would be eased if the whole amount of the loan – another

consideration of no mean importance - 3 The Contractor’s profit upon this part of the

loan would moreover be saved: a saving which presents itself whether more or less

important than the two preceding one in a more palpable shape, being expressible in

figures. 4. To this may be added as a distinct expence saved, the expence in the

score of interest for the time that elapses between the day when the money is

received, and the day when by purchase /redemption/ of an adequate mass of principal,

the interest corresponding to that principal is made to cease. }

+ The state of the Finances represented in their real state, instead of /as they are,

and not/ as state less /worse than they are.

nd [wm 1798]

3?

{ Since the days of Locke, there has never been altogether wanting a set of men who

need to be named philosophers, but for whom since the word has been rendered

synonymous to cutthroat, robber and anarchist, there is no name

....... Had the Minister happened on that occasion to have had any such person

/nameless sort of philosopher/ at his elbow, the person might have addressed him in

some such terms as these.

The extinction of the capital of the public debt is an operation at all times

/eminently/ desirable enough: but there are times when it is possible and there are

times when it is impossible. The times in which it is possible are those which

whether from appropriated funds or /such as the produce of taxes, or/ from

contingencies afford a disponable surplus without borrowing. The times in which it is

impracticable, are the times in which money is borrowed in which the Minister with

nothing but the faculty of creating Annuities pay /future Annuities/, finds himself

under the necessity of raising or borrowing money that is of buying present money,

with nothing in his hand but engagement for future money payable periodically

/payable/ to pay for it. To lessen /reduce/ the capital of the debt is what at these

times is plainly impossible: the very idea of borrowing or raising money is grounded

/bottomed/ on the impossibility of it. What is not impossible is to put on a /the/

semblance of lessening the capital of the debt, viz: by borrowing money for the

purpose of paying off debt: augmenting it for the purpose of lessening it, augmenting

it in the first place, to lessen it as soon afterwards as can conveniently be done,

augmenting it by the exact amount of that sum by which it is thereby to be

lessened.