Mr. SHERMAN. Yes, by payin 6%. interest in old. I wish simply now to show that it is within the power of the Government, if it can reduce the rate of interest, to go s3 consistently with the stipulations of the on s. But there is another argument derived also from another table that I have before me. All modern nations who are now dealing very largely in public debt have as a matter of policy reduced their public debt to some simple, tan gible form, so that in eve count there is a specific debt known to ltilie people of that country, with a fixed rate of interest rescribed bylaw; and the whole of the pubic debt is generall at in that fo as soon as possible. Englandy had formerlyr%le same diversity of securities that we now have; but it has been the policy of English statesmen, from William Pitt down to this time, to reduce that debt into one simple form, so that nothing but the interest should be provided for, and the result has been that the whole of the public debt of England is reduced to a 3%. debt except about one million ponn s. The total amount of the public debt of GreatBritain is 799, 802, 139, and the whole of this may now be said to be a 3%. annuity, the principal, however, redeemable at the pleasure of the Government. In France I find the same thing has occurred. The term “rentes” generally describes the great mass of the public debt. I think all the debt, except a few tech nical annuities, given probably for specific purposes, one called “obligations trentenaires, ” and some floating debt, is now funded in the form of routes. The debt of Russia, also, is now funded into 3, 4 and a half, and 5%. stocks the great body of it in the form of 5%. foreign loans. The same statement holds good in regard to all European countries. Every nation in Europe, where a public debt has crusted in some cases for centuries, has adopted it as a principle to reduce that debt to as simple a form as ossible, so that the interest alone would be acarge upon the treasury, and that a sinking fund should pay off gradually such portion of the principal of the public debt as the policy of the Government would allow. It is manifest that if the debt of the U.S. was now reduced to one simple form of a 5%. stock or bond, so that the U.S. need not look except to the payment of the interest of thntdebt, and to the payment or purchase of such portion of the principal as its policy might dictate, much of our financial difficulty would be removed. What is now the trouble with us? Why cannot this project be adopted? The answer is that a very large portion of the principal of the public debt becomes due in a short time, and the Secretary must provide for the payment of that principal; and this very necessity of going constantly into the market to renew these loans imposes upon him nearly all the burdens of his office and yet I do not arraigu the polic that was adopted during the war of making s ort loans. It was proper to do it, it was necessary to do it. It was not proper for this Government to stipu late to pay these high rates of interest for a long period of time, and therefore during the war it was necessary to make short loans at a high rate of interest; but it was always done in view of reducing the rate of interest after the war should be over, and with a view of consolidating this whole debt. The policy, so far as I know, of those connected with the finances of the country, has been to keep ever in view the principle of redeemability in every form of security issued during the war. Therefore the five 20 note was payable or might be paid after 5 years. The 7 thirties and the various forms of securities that have been issued are within the reach of the Government in a short time. Why was this idea so care fully kept in view? simply to enable the U.S. to retain the advantage of payin the principal after the war when loans could be negotiated on more favorable terms and now we may properly reap the benefit of this wise policy. We may now enter. the money market with the laurels of victory and once. We need no long or compete with the industrial interests og our citizens in borrowin money, but may prescribe our owp terms an renew our debts on conditions consistent with our vast power and resources. Now, Mr. President, the only additional question I need present in this connection is, is this the time to fund the public debt? I say emphatically it is. I believe we have wasted 4 or 5 precious months in doing it. I believe that the process would have been easier at the beginning of this session than it will be now; an why? In order to fund the public debt of the U.S. a large amount of currency is necessary; but it is necessary for us to reduce our currency as soon as possible. We cannot get back to specie payments without some reduction of the currency. Every one desires to resume specie payments. Before we return to specie payments this debt ought to be funded. It cannot be funded on as favor able terms after we return to specie payments. The very abundance of the currency obviously enables us to fund the debt at a low rate of interest; and it is just and right, as this debt was contracted upon an inflated currency, that upon that same currency the debt ought to be funded in its permanent form. The effect of the superabundance of paper money is to reduce the rate of interest; that is obvious. At the time of the celebrated John Law excitement, the rate of interest in France was reduced to one and a half%. by the overwhelming amount of paper money. I say that now, above all others, is the time to fund this debt in some form of security. If we postpone it 6 months or a car it will only add to our difficulties. The onger we post pone it, and the longer we leave this amount of dentin indebtedness upon the market of the U.S., the less will we be able to fund it at a low rate of interest and on favor able terms. and, sir, we have no choice about it. We have got to do it, because this debt is maturing, and we have got to put it in some other form unless we intend to use a very expressive phrase to shin it, and go into the market to renew short loans. This debt may tures, and it has got to be paid. It can be paid, not by taxes but by so ling new bonds and new loans; and therefore we must determine upon some form of funding this debt as soon as practicable and this brings me to the main question involved in this bill, and that is what rate of interest the U.S. ought to pay on our public debt. Upon $830,000,000 we are now payin interest at the rate of 7 and 3 tents%, higher than we allow our citizens to exact from each other. Upon the great part of our debt we pay 6%. in old, equivalent at present rates to 7 an 8 10th s%. in the currency for which the bonds were sold. We exempt our public creditors from the burdens of taxation. The question is now whether we are willing to continue to pay such interest, and whether we are unable to meet our obligations on more favorable terms. and, sir, in considerin this question, I wish it distinctly understood thnt I would not arbi trarily change any contract with a public cred itor. Public faith is the most precious jewel of a nation, and [would not tarnish ours by any violation of promise or contract. So far as we have stipulated we mustpuy; our credit demands it. An old writer says: “This is the greatthing called credit, Credit is a consequence, not a cause: the effect of a substance not a substance: it is.the sunshine not the sun the quickening something call itwlfat you Will, that gives life to trade, givesbeingto the branches and moistureto the roots. It is theoil to the wheel, the marrow in the bone.the bloodin the veins, and the spirits in the heart of all the uegoce.trade, ensh, and commerceof the world." Credit is based, not only upon a strict compliance with contracts and ability to perform them, but also upon greateare in making them. We must have prudence in makinga contract, honor in observing it, and ability to perform it. These are the elements of public as well as private credit. Our history as a nation has shown that we have the menus and will to fill our contracts. It is for us to show our prudence in making these for the future. In private dealing we will not trust a man who has eat means and ample property if he is reck css in making engagements, but we do trust a prudent man who has no resources but his prudence and probity. As a nation we ought not to impair our credit by making engagements more onerous than other nations do, unless we are compelled to do so by stern necessity. Now, sir, I cannot but think that it is discreditable to us as a nation that we are now issuing our bonds at a higher rate of interest than any Christian nation of the world; that we now continue to issue 6%. bonds, principal and interest payable in old, at a coin value of 75 cents on tedollar. I do think the fact that all European nations, with all their complicated relations and expensive forms of government, can sell their securities at a more favorable rate than we, is an unpleasant fact no longer justified by the relative condition of the several countries. While we were in war, our Government in discredit, and our own people fearin the result of the struggle, we were justified y necessity in paying high rates; but to do so now is a confession of weakness that I see no foundation for. Let as test this question by a more detailed comparison of the rates of interest paid by this and other countries, and of the resources of each. I have a table showing the debt, population, and annualinterest paid by leading nations:, But this table, while it presents us in an unpleasant aspect, does not show the entire facts. Of our debt only $2, 200,000,000 is on interest. The residue is not funded or is in the form of currency, but on the sum of a little more than $2,000.000,000 we pay $189,000,000 of interest, ivhile GreatBritain pays a less sum of interest by some millions of dollars on nearly double the debt. The rate of interest on her consols, at their present market value, is 3 and a 3rd%. 100 dollars of her bonds, bearing interest at 3%., will sell in any money market of the world for 86 dollars in old, equal to 94 dollars in our coin, whiile $100 of U.S. bonds, bearing 6%. interest, will sell in Europe at from 65 to 70 dollars in sterling gold, undin the market at NewYork for about 76 dollars in our coin. Is there such adifference between the condition ofaffairs in this country and in GreatBritain; is there anything in our public credit, the nature of our institutions, or the character of our laws, or in the uncertainty of payment that compels this exorbitant difference? I do not think so. In France the rate ofinterest is about 4% and a fraction; sometimes a little less than 4. In Russia it is 5%. In Austria it is 5%. 5% is the highest rate paid, except during an emergency by any of those countries; and their resources are not to be compared with ours. This table shows that, teste by the public debt of any nation of modern times, the amount paid by the U.S. is entirely exorbitant, and therefore the 1st duty is to reduce this rate of interest, not by arbitrary means, but by every device of legislation. In my judgment, itwill be a public discredit if the SecyTreasury is compelled to issue any more 6%. gold bearing bonds. When you examine our resources and compare them with the amount of our public debt, the latter seems insignificant. It is shown, not only by our official tables, but by the actual exhibition of our industry and strength in the last 3 or 4 years, that we have more elements of strength and more resources in money than any nation of Europe. England has but 30 million people upon whom her public debt rests; we have 35 million people, and our population increases at a ratio without exam le, maintaining that ratio for 60 years. We have the broadest agricult ural field of any nation in the world, without even excepting Russia, because the great bod of Russia is either too cold or too dry for agricultural productions. We have a territory of compact form but varied climate, and productions greater in extent than all Europe. We have 2, 044, 077 separate farms, each occupied by the owner, and in the main tilled by his own labor. Our coal fields are estimated to be 36 times the size of those of GreatBritain and Ireland, and are distributed through outall portions of the countr. As coal is the basis of the wealth of Great ritain, and actu ally yields 72 million tons, while we now consume but 15 millions, we have in coal a bank that can never break, a mine of jewels more valuable than all the gold of the world and our mineral resources are greater than those of any two countries of the world. California has furnished to the mints of the U.S. for gold coin over $360,000,000, and probably a greater amount in bullion exchanged for foreign reductions. Iron in mountains of rich ore is scattered in most of the States. We have more actual wealth eapila, now, than any nation in Europe. fehre price of labor here is twice what it is in Europe. All the elements which enter into the computation are in our favor. For us to pay this rate of interest, it seems to me, is an acknowledgment that there is some defect in our form of government, some insecurity, or some unreasonable demand for the use of money, that I cannot explain. The vast disproportion between the rates of interest we pay and our resources has excited the intelligent observation of an Englishman recently among us and who has recently writ ten a book upon the resources and prospects of America, a copy of which I have before me. I refer to Sir Morton Pete, and I am sure every Senator who hears me will deeply regret that one so friendly to our country seems, by the advices we have this morning, to have been involved in financial embarrassments at home. This intelligent writer, who is familiar with the whole system of finance and taxation in England, has presented in this volume the results of his stu y and observation of our resources in a manner that must attract the attention of every reader. The book is a careful collection of facts admirably arranged, but without attempt at concealment or exaggeration, and he closes itby saying that after the completion of our Pacific railroad" Weshall becalled upon to regard America as the greatestnation of the world. She will be entitled to take that rank by reasonof her extent, her diversity of soil and climate, the character of her communications, the varict of her resources, her vast mineral riches, and the a undantfield which she resents for labor and for the employment of capita and enter prise. Many amongusare accustomed to smile when we hear the Americans speakof the U.S., in their accustomedmanner, as a great nation. But there is no moreboast in that description. emphaticully, America is a great nation. Where can wefind her equaLINGeographical and natural advan taxes, in material progress, or in general As prosperity? a united people, the Americans present to t a world a spectaclethat must exeitogeneral admiration. Regardingthemasof thesameraceand ances try With ourselves.as a peopleusing our language. Governed by our laws, united by the same religion, influencedby kindred sentiments, their progressis a spectacle which should kindle our admiration and enthusiasm.” and, sir, in this connection we must re member that while our resources are so great, they are not locked up in the bosom of mother earth, but may be touched by the power of taxation. The actual experiment has been tried, and the result has been far greater than any of us estimated. We are now collecting a revenue greater than any modern nation. A recent official statement made to us by the revenue commissioners shows that during the current year the result of our taxes is over 500 million dollars, a sum greater than France or GreatBritain ever collected in anyone year. We are now engaged in the duty of repealing many oft ese taxes, bhuat pwpiy I still retain $30,000,000 to apply annually on the principal of our debt; a fact that has forcibly impressed the mind of Mr. Gladstone, who, after years of peace, is fortunate in being able in GreatBritain to propose a plan of slightly reducing the debt of that country by changing a portion of it into terminable annuities. Another element of credit is that under our system of government our national expenses are far less than other nations. Sir Morton Peto says: “ In proportion to population, the U.S. in 1860.had, I apprehend, the smallest expenditure and the smallest national debt of any country in the world." and, sir, even under the increase of our expenditure since the war our actual expendb ture, other than on account of the public debt, will be in the future far less than the same population in Europe. Here war expenses cease with the war. No standing army swells exorbitantly our estimates. Our heroes who saved the country byyar are now enriching it by their labor. Our current expenses next year will be considerably less than 200 millions. So that whatever view we take of our financial position, whether we consider our resources, our receipts, or expenditure or the varied industry of our people, we must conclude that we are not justified in aying rates of interest so far in excess of other nations. Again, sir, the present rate of interest is a war rate, and the distinction between a war rate and a peace rate is recognized by all the writers. England was compelled to sell many of her 3%. annuities at some 60 cents on the dollar; but even England when she was involved in the great war with Napo leon never paid anything like such a rate of interest as we do this day. It seems from the report of one of the revenue commissioners, which is very full of facts and details on this subject, that the average rate of interest paid by GreatBritain during her war with the French republic, of 8 years, was 4 17s. per 100; a little less than 5%; that during the year 1802 it was reduced to 4 48.; that during the war with the French empireil: was 4 15.9.; that from the end of the war until 1821 it was 4 6.9., or 4 and one 4th%., and that the average rate during the whole period of the war was 4 and 3/5th s%., reduced to a specie standard; and yet we have paid, uniformly, 6%. in gold, receiving paper for our bonds, paying the interestin gold, and converting one into the other. At one time during the war we paid at the rate of 13 or 14%. on mone, counting the difference between gold an paper. such a thing as that would exhaust any country except ours. We were able to borrow this money and get it from the people; but it is obvious that at the very earliest moment we must go back to something like a reasonable rate of interest on our public debt. We must not tear from our people the results of their labor and pay it for purposes of this kind when there is no necessity. I take it, therefore, as an axiom with which to set out, that we ought to reduce the rate of interest. I expect to live to see the time when the rate of interest in this country will not be over 3 or 4%., and now we propose to reduce it on new loans to 5%. There are one or two collateral views that Senators might reflect upon with great propri ety. 1st, there is the influence of these high rates of interest on the industry of our country. I have a letter here, which probably preseats this poiiit ase lenrly as I can, from a very intelligent citizen of the city of NewYork. I will read a short extract. He speaks of the effect of the high rates paid by the Government in the city of NewYork. 9 says: “A powerful causewhich exposesthepoorandper sonsof limited meansto such high rents is found in the roll of interest established by national and State laws and the increasedvalue given to moneyby such legislation. During the rebellion the Government offereda bi her rato ofinterestthan the lawsof NewYork and the sea board Statesgenerall had establilshed as legal. Hence investmentsin U.S. securitiesnow realize more than 2%. ovar bonds and mortgages in NewYork. Capitalistshave therefore been withdrawing moneyfrom real ostate loans to invest them at higherrates in Governments. This policy affectsse oresof millions of ca ital. It has a direct tendency to limit and retardbu dingand discour c all State developments. It has entirely unsettle the whole system of the demandand supply of moneyfor private enterprises. Every day an unprecedentednumberof housos and lots arethrown on the market. either from the inability of the bot rower to pay offhis mortgage sor debt! in any other way. Orfrom the imperative necessity of raisingmoney to prosecuteold business or start now. Theseenforced estatesales benefit the capitalists alone, who in return demandat least 15 or cent.on their new property and those who are obliged to rent are thus c"l at their mercy. Read Byefore the war ca italists and corporations were to loan from fi{Ito 70%. on real estate secunlies. Wit from two to 5,000 dollars on hand a man could by and build with a certain reliance on a loan. while is future earnings. “til the grad ualadvance of property. would ultimately KIVGhim a clear title to a home for himself. In this way many 1000sof cod dwellin were constructedin NewYork; buttearrest of this sys temhasput our populationinto the hands of the land lords and they will hold the powertill the system is ohmgfid. If the poor becamerich. They would dothe name. That is obvious. The effect of these high rates paid by the Government is not only to absorb the floating capital of the country, but to determen from engaging in enterprise; and therefore all over the cities of the U.S. it is a (ommon remark “It is impossible to get houses.” In the West the cry is distressing. In all the cities it is impossible to get a house at a fair rent. The rent absorbs all a mans little earnings. The result is the people are crowded into tenements, half a dozen families ina house; in NewYork. in some cases 2 or 3 families in a room; and all these distressing incidents grow out of the advance in rents, the greater expense of living, the high prices of produce, of food, clothing, and all the necessaries of life. I think there is no fact that contributes so much to this state of affairs as the high rate of interest paid by the Government of the U.S. We go in and compete with every man who is talking about building a house, to borrow money. We compete with every class ofindustry. We compete with the railroad companies in the sale of their bonds, with the manufacturers in the building of new warehouses. We compete with all classes by offering a higher rate of interest than we allow the courts to enforce for them. During the war that was necessary; we could not avoid it; but is it necessary new? I think it is not! The great leading objects of this bill are to fund the public debt and to reduce theinterest;, but there is another object proposed by it: which I think is peculiarly an American one, and upon which I ought to so something before I proceed to examine the etails of the bill, and that is the necessit of providing when we contract a debt for the payment of it. The original funding act framet by Alexander Hamilton was based upon the idea that a public debt should be temporary, and this idea isingrafted upon American finance. In view of this, in the 1st loan law of 1862, if I remember aright, we provided that 1%. of the amount of the loan should be set aside as a sinking fund with a view to pay off the principal of the debt. That pledge has never been redeemed, nor during war was it possible or proper to redeem it. A sinking fund can properly be accumulated onlyduringpeace. Itwou d be bad economy to take a portion of the money borrowed at high rates of interest during war and invest it in securities purchased in the market and then lay them aside and accumu late the interest for the purpose of paying off a debt during peace. GreatBritain tried that for nearly 100 years and finally aban doned it. The old form of a sinking fund, which was the favorite theory of Robert Walpole and William Pitt, was abandoned, then resumed, and was finally abandoned in 1819. I have an interesting book here, the reface of which was written by the celebrate Mr. McCulloch, in which he speaks of the abandonment by GreatBritain and by all other nations of the old form of a sinking fund. I will read an extract from it: "Neither must it be supposed that the notion of the wonder working effects of sinking funds has beena mere harmless crror. 0n the contrary, few delusionshave beenpractically somise hievous. “Dr. Hamilton. of Aberdeen has the merit of having dissipated the delusionin regard to the sinking fund “Ho showedthat instead of reducing, the sinking fund had increased.the debt and he proved to demonstration that the excessof revenue over expenditure is theonly fund by which any portion of th"e public debtean everbe ise hnrged. but since Dr. Hamiltons work appeared.more correctaccounts have been obtained of the expenditurc. loans, &c. during the Greatstruggloterminated in 1815 and from these it may beeasily shown that the sinking fund wasnot a clumsyonly. but a costly imposturc. In roof of this we be; tostatethat the loans contracte in each car from 1701to 1816.both inclusive. amountedin a l to 58l.87 l.55a7t, an annual charge to the public of 30, 174.364O. f these loans the commissionersof the sinking fund reccived 188, 5fl, 350. The proportional annual charge on such portion being. of course, 9,733,090.But it further appears from the accounts referredto. that the stockwhich the commissioners purchased with this sum of 188.522.25 transferredto them out of the loans, only yiclded an annual dividend of 9, 168, 232.0n the one hand. therefore.an annual char O of 9, 726, 090wainecurred to enable the sinking und commissioners to go to market; and on the other, they bought stock which yielded 9, 168.232 a year; so that.on the whole, their operations during the war occasioned a dircctdead lossto the country of no less than 557.857a car. equivalent to a 3%. enpitalof 185, 233e, xclusiveof the expensesof the ofice, which amounted to above 3260.000 such was the practical result of Mr. Pitts famoussinking fund. so long rerrarded as the palla dllzlll 01f public credit, and he sheet anchorof the nqlsgtwlthstandinn Dr. Hamiltons book was published. as already stated.in IblJi. thestatutefor the sugpression of the sinking fund. the lllGcorge 1", c. l, was not passed till 1329. It enacted that in time to come the fllln to be applied to the reduction of thenational debtshouldbe the actualannual surplus of revenueover expenditure. The old form of sinking fund adopted in England, and also in this country, was to invest by certain persons named in the low specific funds and authorize them with those funds to buy any portion of the public debt. That plan of accumulating a sinking fund has been abandoned, and now, as this author says, the only proper way is to aply a fixed sum raised by taxes and from surp us revenue to the payment of the public debt. Instead of cudeavoring to keep tedebt alive by sinking fund commissioners, the application of a specific sum to the nyment of the principal and interest of the debt every year would have the same effect in extinguishing the public debt as if invested in sinking fund commissioners and without the loss and exease of management.