By this proportion we find that prizes amounting to $5,000,000 would accumulate to.... $401,609,451 481,931,341 562,253,231 602,414,176 It follows from the above calculation, that having a margin over and above the payment of principal and interest of...... We could nearly allow for prizes $7,500,000, making Presenting a loss to the Treasury of only...... $601,611,765 602,414,176 $802,411 But if the prizes were $7,000,000, or $562,253,231, there would be a balance in the Treasury of $39,358,534. If the former amount of $7,500,000 were granted, the annual prizes or bonuses might be fixed as follows: By such an arrangement, it is fair to presume that the whole loan would be rapidly taken up at par, and divided in small parcels among the whole population, and perhaps that the allurements of handsome bonuses would create a lively demand from Europe, confidence in it being increased by the reflection that a loan divided among the poorer classes would be less likely than any other ever to be repudiated." A most important feature in this arrangement is, that for a number of years the annual payment for principal, interest, and prizes would scarcely exceed the sum required to pay the annual interest on an ordinary loan, though gradually increasing towards the latter part, when returning prosperity would enable us to meet the larger demands more easily even than we can the smaller ones in our present embarrassed condition. But a still more satisfactory point is obtained, viz.: the gradual cancellation of the debt, which, at the end of the thirty years will be entirely paid, while in an ordinary loan it remains still in existence. European quotations of Lottery Loans show that after the drawing of series, and before the drawing of prizes, the bonds bring a handsome premium. This would no doubt be the case with us, as the expectation of receiving the principal with interest, and perhaps one of the large prizes, would give a strong impetus to speculation. It may be remarked, that the low rate of four per cent, not payable every year, but only when the bonds become due, might be considered a poor investment, where such is the chief object. Let us therefore see what result five per cent would produce: $8,929,665 Leaving still a balance in the Treasury of........ Which proves that even at that more satisfactory rate, prizes amounting to $6,250,000 might be granted, and there would still remain in the Treasury a gain of nearly $9,000,000. It will be perceived by the preceeding explanation that even the most unfortunate holder, whose bond may be drawn only at the end of the term, and perhaps without having obtained a prize, will receive back his money with interest; this cannot, therefore, be called gambling, and it can offer no reasons for objection even to the strictest moralist. Still, there may be prejudice in the mind of some, who, without considering that the so-called prizes allotted to a part of the holders, and to be drawn in the same manner as a Lottery, are in addition to the full repayment of their advances, might still think it an unclean thing to touch. To quiet these croakers, the loan might be arranged differently, in a manner that would perhaps even prove more attractive and satisfactory to all parties. In the annexed list of European Lottery Loans, it will be found that the city of Lyons, in France, has issued a loan of about 8,000,0000 francs, redeemable in fifty annual instalments, without prizes, but in lieu of them, every bond of 1,000 francs receives when redeemed an addition of 250 francs, every bondholder being therefore certain to receive, besides the annually paid interest of five per cent, a bonus of twentyfive per cent on the principal. The city of Liege, in Belgium, has likewise a similar provision, repaying 100 francs for every bond of 80 francs, but the interest only two per cent, which allows them to grant also prizes from 50 upwards to 60,000 francs. Upon this principle a loan might be arranged without prizes, but allowing a bonus to every bondholder when his bond becomes payable, as fixed by annual drawings, and paying interest on the whole loan at the rate of four or five per cent per annum, by coupons attached and made payable once a year. The following computation will show the amount of interest at the rate of four per cent that would be paid every year, and its accumulation at the end of the thirty years, ten million dollars principal being paid off every year at the same time: 1864... $12,000,000 $66,602,204 | 1879.. $6,000,000 $13,727,566 Accumulation of interest at five per cent.. Accumulation of interest paid at four per cent..... To find the result of coupons bearing 5 per cent add 4.......... The annual payment of interest on the whole loan would therefore cost the Treasury in 30 years, at 4 per cent... $633,302,623 $633,302,623 158,325,656 .... $791,628,279 Add $10,000,000 per annum of principal.... 803,218.902 Add 40 per cent, or $40 bonus on each bond. 321,287,561 If the interest allowed were 5 per cent per annum Every bondholder would then receive interest at five per cent every year, and when the bond is redeemed a bonus of $120, and all would be in the same position, with the only exception that there would be a manifest advantage in favor of the bonds whose redemption is fixed by each annual drawing of the series, and which are, consequently, certain of receiving the bonus at an early day, while the others have to run the chance of obtaining it only at a remote period. By this arrangement, even if not by the other, all objections against gambling are removed. The holder of the bond receives a good interest, with fair prospects of a large profit, while the government throws out great inducements to take the loan at par, and remains independent of capitalists, who will do all in their power to depress the prices. It will be perceived that in the two first examples simple interest is paid only when the principal is redeemed, the Treasury having the use of it until thus paid. This gives it a great advantage, and enables it to make the prizes or bonuses so much larger, assuming that it is willing to apply to this purpose the full cost of an ordinary loan sold at par. In the last example the interest is paid annually on the whole debt by coupons attached. In the former way the annual payments increase from year to year, while in the latter they decrease-the principal being annually reduced to the extent of $10,000,000. The inducements offered by both modes to the purchaser are very great, and it is more than probable that the whole loan would be rapidly taken up in large and small sums by the whole population, and at par and perhaps even at a good premium, while an ordinary loan is subject to the dictation of banks and capitalists, to whom alone it is accessible, and who may make their terms very onerous. That the issue of bonds, now under discussion by Congress, will only be taken at a heavy discount, is already certain; and what the consequence of such a large amount being thrown upon the market will be, is a matter of conjecture; but we anticipate a most ruinous result. It is obvious that to receive 50, 60, or 70 per cent to pay interest on $100, and to pay finally the whole $100, must cause a serious loss to the Treasury. Borrowing money at a discount would be equal to the following rates of interest, assuming the value of money six per cent, compounded half-yearly, At...... 50 per cent. Six per cent loan for 20 years. 40 90 80 70 60 6.96 8.16 9 71 11.67 14.68 per annum. 6.74 7.66 8.88 10.41 12.62 It is a matter for reflection whether a bonus loan with prizes to a few, or one with an universal advance to all, would meet with greater patronage from the public; and it must be likewise carefully considered whether the large prizes connected with a loan on which the interest is reserved until the payment of principal, would offer a satisfactory compensation for the privation of income, in comparison with a loan on which the interest is paid annually. If the granting of prizes is deemed unobjectionable, or preferable, the two last modes of loans, with coupons at 4 or 5 per cent, would permit the following bonuses: It has been shown that in a loan at 4 per cent for 30 years after paying off annually $10,000,000 of principal and the interest on the whole loan, there would remain in the Treasury at the end of the term a surplus of......... $330,952,409 Which would be equivalent to annual prizes amounting to 4,120,000 And in a loan at 5 per cent, a surplus of.. Equal to annual prizes of.... 172,633,753 2,150,000 In lieu of paying every bondholder in the former case a bonus of $40, and in the latter, of $20, at redemption. This surplus might also be applied to a regular but smaller bonus to all, and the remainder to annual prizes, of course much reduced. The examples offered are all predicated upon a loan for 30 years. If the loan were extended to a longer period-say 40 or 50 years, the term of most European loans-the advantages would appear much greater. These suggestions are respectfully tendered to the careful consideration of our financiers, and I flatter myself that they are well worthy the attention of Congress. They seem to me to present a choice of most effective means to relieve in a most satisfactory manner the urgent wants of the government, and a solution of the highly perplexing and most important financial question now before Congress. LIST OF LOTTERY LOANS ISSUED IN DIFFERENT PARTS OF EUrope. ANHALT DESSAU, DUCHY OF. Lottery loan of 1857, for 2,000,000 rix dollars, in shares of 100 rix dollars; interest 3 per cent by coupons. Divided into 400 series of 50 numbers each. The drawing of series takes place every year on the 15th September, and of prizes on the 15th of January following. Principal, interest, and prizes are payable on the 1st of April. ANSBACH, IN THE KINGDOM OF BAVARIA. Lottery loan, called the Ansbach Gunzenhausen Railroad Loan, of 1856, for 1,750,000 florins, in certificates of 7 florins; divided into 5,000 series of 50 numbers, and redeemable in 50 years. The smallest prize till 1866 is 8 florins; after that period 14 florins. The largest prize in each year is 25,000 florins. BERLIN, KINGDOM OF PRUSSIA. Lottery loan of 1855, for 15,000,000 rix dollars; coupons payable 1st of April. Redemption annually from 1856 to 1895, according to programme. (No other particulars given.) BRUSSELS, Kingdom of belgium. City Lottery loan of 1853. Drawing of prizes 31st of December, and payment of principal, interest, and prizes 31st of March. Certificates for 100 francs. DARMSTADT, GRAND DUCHY OF HESSIA. Draw Lottery loan of the Grand Duke, of 1834, for 2,375,000 florins, through ROTHSCHILD of Frankfort. Premium in certificates of 25 florins. ing 15th February; payment three months after. |