1878 on the Debts of Sovereign and Quasi Sovereign States

7/31/2019 1878 on the Debts of Sovereign and Quasi Sovereign States

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I

?'*>SOVEREIGN t

-w>

1

QUASI-SOVEREIGN STATES:

THEIR DEBTS TO

FOEEIGJST COUNTRIES.

HYDE CLARKE, V.P.S.S.

Reprinted ront he Journal op titt, Statistical Society,June, 1878.

Of i>LIBRARY

LONDON:EFFINGHAM WILSON, ROYAL EXCHANGE.

1878.


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On the Debts of Sovereign and Quasi-Sovereign States, Owing

by Foreign Countries. By Hyde Clarke, V.P.S.S.

[Eead before he Statistical ociety, 6thApril, 878.]

CONTENTS:PAGE

I.History of the ForeignLoan Markets, Jews,Lombards, Antwerp,Amsterdam, aris 1

II.London s an InternationalMoneyMarket 5

III.Amount of holding inForeignLoans 9

IV.Issues f Foreign oans n-London from 1794 to

1878: Table 15V.Principles f Home and

Foreign InvestmentAmounts Invested1872-76 21

VI.

VII..

PAGE-DoForeign nvestmentsn

Loans romotehrift orextravagance ffect nthe country 26

-Amount of Loans inDefault, 878,andEstimateof Default 31

VIII.International aw andProcedure gainstSovereignDebtors 33

IX.Division of NationalDebts mongConqueredStates Cases 40

It is amidst the growth of many States, and the wonderful development of the world, in America, on the Pacific, in Africa, and inAustralia, that a vast extension of commerce has been seen.Among other things, large loan operations have been engaged in

with various Governments, in which all the saving classes ofEngland, France, Holland and Germany, have taken part. Meanshave thus been found for the construction of railways and publicworks, in the United States, Mexico, Cuba, Peru, Chile, theArgentine States, Russia, Roumania, Turkey, Egypt, Java, China,and Japan. The permanent advancement of prosperity hroughoutthe world has been promoted, accompanied by an enormous ncreaseof production, and the opening of many markets or the consumptionof manufactures.

At the early period after the formation of the European States,loans were made to kings and princes by the Jews, on a system ofcopartnership ately termed syndicate. At a later period, theseloans were made by the Lombard and Italian money-dealers, andthe descendant of a Florentine banker, Peruzzi, still claims aprincipal sum, repudiated by one of the Edwards, and the compoundinterest upon it.


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2 Hyde ClarkeOn the Belts of Sovereign and

Among other operations, the Greshams, under the title of theking's exchanger, appear to have been engaged in raising temporaryloans at Antwerp, and its allied bourses. As late as 1800 United

States dividends were paid at Antwerp, and there is still a smallforeign bourse, but supplanted by Brussels.The merchants of the Hanse Towns and Low Countries had

already been engaged in those operations in succession to* theItalians, when the independance of Holland concentrated them inthat country, which likewise became a refuge for the Jews drivenout of Spain.

The accession of "William f Orange to the throne of England,by putting a stop to the naval rivalry, brought England again into

its old and close relation with Holland, and on tie establishment ofthe funding system here, the Hollanders took a large part in ourconsolidated debt, bank stock, and in India stocks.

All through the last century, Holland was the great centre forthe trade in foreign loans, one means by which that country wasmuch enriched. In 1778, Holland was reputed to hold 62,000,000^in the stocks of France, England, &c, bat this is doubtful.McCulloch n his " Taxation," p. 412, is wrong in his deductionsfrom this as to the

positionof

Holland,for the

peopleof Holland

continued to accumulate capital down to the French Revolution,but other countries grew more rapidly in population and production.The French Revolution, attended by wide repudiation, to a greatdegree destroyed his branch of accumulated capital, and the yokeof the Empire still further impoverished Holland. At the GreatPeace, Holland was restored, but it was no longer in the samerelative position, England in particular having largely grown.

One class of operations of which we have an account, is for the

then new United States, for which Holland was for some time themoney market, and where United States railway bonds are stillplaced in conjunction with Fi'ankfort.

During the war the United States borrowed n Holland at 4 percent., under the guarantee of the French court, 400,000^ Thisserves to show how moderate he rate of interest then was, and howthe credit of France stood.

Besides this loan before 1790 the United States had borrowed nHolland:

First oan, 5 percent 440,000Second 4 200,000Third 5 100,000Fourth 4 100,000

It will be seen that the United States also had a good credit,and they upheld their engagements in Holland, although their


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Quasi-Sovereign, tates, Owing by Foreign Countries* 3

finances were much embarrassed. In 1800 the foreign debt of theUnited States of which the dividends were payable at Amsterdamand Antwerp, was $10,000,000 (2,ooo,oooZ.)

The last United States instalment on the Dutch debt was due in1809.It may here be well to state that the Hollanders maintained their

own integrity. While under the yoke of the French King, LouisBonapa,rte, he reduced the debt of Holland to one third. On thePrince of Orange becoming king in 1814, one of the first acts wasto restore the debt to its integral amount, although the Hollanderswere not in a state to meet the whole interest.

Holland still took part after the peace in foreign loans,particularly under the auspices of the Hopes, and the thrift andenterprise of its men and women, have furnished large means forsuch investments to the present day, but it has been in subordination to England. One cause has been, that the individual loanshave been beyond the compass of the market of Holland; andanother, that the business of Frankfort and Hamburgh wascarried on directly with London or Paris.

Paris too became a rival in this branch of enterprise to Holland.

After the revolution of July, Paris became a resort for the wealthy,not only as a city of pleasure, but as a refuge from the revolutionsof Europe and the Spanish-American continent. It has been attimes a capital of the Spanish-American race beyond Madrid.Habits of speculation, accompanying hose of work, led the Frenchmiddle class to afford means for such operations, and the more soas the solid advance of France reduced the home returns on money.Thus small loans could be placed on easier terms in Paris than inLondon, and Paris was always available to take a portion of alarge loan. Paris too became the first stage in the advance of theGerman-Jewish money operators, who in time competed with the oldfinancial houses, and launched schemes of a character most disastrousto the victims. In this again they were assisted by the formation oflarge institutions in France, nominally for banking, but in realityengaged in gigantic speculations n association with their directors.

It may not be out of place to say some words as to the Parismarket. Under the first Napoleon it supplied large funds for the

Empire.An operation recorded of that time, is that in 1811, the King ofSaxony negociated there a loan of 12,000,000 frs. (480,000/.) onaccount of the Grand Duchy of Warsaw, on the security of the saltmines of Wolisla. He appears to have placed about 28o,oooZ.

On the restoration, he Paris market became quite prostrate, andcould not find money for local purposes.

On the 18th February 1817, a contract was concluded by the


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4 Hyde ClarkeOw he Debts of Sovereign and

French Government with the houses of Baring and Hope, for thesale of 400,000/. 5 per cent, rentes at the gross price of 55. Onthe 11th March a second agreement was made for 345,200/. on thesame terms, and afterwards a third

agreementwith the two houses

and with two French banks, for the sale of 360,000/. at 64 percent.

The commission on these transactions was 534,200/. at 2-| percent., which came chiefly to the Barings and Hopes (Bernard Cohen," Compendium of Finance," 1822, p. 11, and Wellington's Supplementary Despatches).

On the 9th August, 1821, tenders were opened at Paris for500,000/. rentes 5 per cent. The houses that tendered were

Delessert nd Hobtinguei' 85*55Sartoris ndGreffulhe 84*60Rothschild ndLaffitte 84*25"RicardondG-roves 84*024-

(Bernard Cohen, " Compendium," Appendix, p. 89).This shows well enough the nature of such operations, and what

large resources they furnish for the houses engaged in them.By 1820 Paris had so far rallied that the house of Ardoin in

conjunction with Hubbard, engaged in the series of Spanish loanoperations. The Paris house of the Rothschilds placed its loansalmost exclusively on the Paris market.

Brussels may be regarded as a dependency on Paris and Frankfort is closely in connection with it.

Coming to England, we find that during the great war, theStock Exchange was largely occupied with new English loans ofall denominations, omnium, scrip, lottery tickets, long annuities,short annuities. One form of aiding foreign States was by loans,commonly guaranteed by England.

On the peace, some foreign loans were issued for the adjustmentof obligations, but it was the establishment of South Americanindependence which led to the formation of numerous loans. Itwas the influence of Mr. Canning which largely affected thecountry. Great hopes were raised of the results to be obtainedfrom enterprise n the countries of gold and silver, such as aroseafterwards on the opening up of California and Australia. The

results, indeed, ultimately proved greatand remunerative.

The loans for Mexico, Central America, Colombia, and BuenosAyres, as well as for Greece, were at a very early period repudiated.It was very easy to call a country a republic, but it was difficult tocreate citizens, and none the less so to constitute statesmen andadministrators. Speedily the countries were the prey of politicaldistractions and civil war. The money subscribed by the investors


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mrmmrn

Quasi-Sovereign States, Owing by Foreign Countries. 5

in England and HoEand seldom got into the hands of the Governments. The loans were manipulated by the secondary mercantilehouses contracting them, and at the most some military stores orships reached the nominal borrowers.

The social misery produced by these defaults was great, formany families attracted by the high interest imperilled the greaterpart of their fortunes. Since then, although individuals havecommitted the same error of putting too many eggs into onebasket, the main body of investors in England, Holland, andFrance, appear to have adopted the practice of distributing theirrisks.

So far as thegeneral English public

wereconcerned,

heforeignloans of 1822-25 were a warning and a deterrent for some years,

but other circumstances tended to make London a great moneymarket. The revolutions following that of July, 1830, in France,drove many of the nobles and traders to look more to this countryas a place of shelter for their wealth, nor was this effect lessenedby the energy and prosperity which followed those events. Theemancipation of industry attendant on the reform administration nthis country gave a greater impulse to our own operations, and

strengthened the general spirit of enterprise, and forgetfulness ofthe old repudiatory tendencies of our American correspondents,and the manifold material progress of our kinsmen, rendered itpossible again to appeal for funds for various loans and undertakings.

II.Thus for the last half-century this country has become the

chief centre for foreign loans. This is not on the vulgar faith that

John Bull's enormous wealth enables him to supply money to allforeigners, but because this has become the great centre for lendingthe money of foreigners to foreigners, as Holland formerly was.

One chief element of this condition, is the peace and theattendant political stability of England, as compared with thecountries of the continent. The great material prosperity ofEurope until the late crisis does not diminish this influence, butprovides further funds for its maintenance. The greater a marketthe greater it must under the same circumstances become.

London is consequently, notwithstanding the attractions ofParis, the chief seat of the money-dealing houses, and the greaterfacility of the naturalisation laws, the emancipation of the Jews,the power of purchasing ands, the non-existence of a close nobility,the absence of social obstacles, all tend to 'encourage the residenceof those, whom a disagreeable climate and the want of Parisianattractions might deter.


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6 Hyde ClarkeOn the Debts of Sovereign and

The reception on the continent of the pound sterling in gold asa fixed standard has very much to do with the preference ofLondon as a seat of financial operations. The attempts to placeother countries on the same footing as England by the demonetisation of silver in Germany, France, &c, have not been attended witha feeling of assurance as compared with England. There is also nofear abroad of the displacement of the pound sterling by a papercurrency, which has played so disastrous a part in many countries.

While England was still regarded with respect on the continent as a power able and willing to maintain her own rights, therewas always a belief that any undertaking under the English namewas safe.

Althoughthis belief is diminished

sqfar as the

EnglishGovernment is concerned, there is a feeling in favour of anEnglish status for international oans on other grounds.

In Paris the Bourse is a dependency of the ministry, attendedby a commissary of police, and requiring the fiat of the ministerfor the resolutions of its committee. Elsewhere the bourses,except at Amsterdam, cannot rely on freedom from administrative intervention. In Paris and other places the restrictionsof the police on political meetings, constitute an impediment in

the holding of assemblies of aggrieved bondholders, and interferewith organisation. The newspapers not being provided with shorthand writers, give no adequate report of the proceedings. InLondon the powerful daily papers (the " Times" not allowingpolitical topics to prevent the discharge of such a duty), and thefinancial papers give more space to such proceedings than aParisian journal does to those of its legislature.

The Stock Exchange in London, being free from administrativeintervention, is able to act with effect. When in 1868 the

Austrian Government made an arbitraiy conversion of the twoAnglo-Austrian loans of the Messrs. Rothschild, and of a Franco-Austrian loan, the Council of Foreign Bondholders was able toobtain from the Stock Exchange the removal from the official listof all Austrian securities as a penalty in 1869. The Frenchambassador was pretending to make the most violent representations at Vienna, and the Syndicate of the French Bourse wereallowed to proceed with the case of grievance; but when theypassed the like resolution as the Stock Exchange, the whole mattercame to an end. The minister did not give his signature, and theresolution was abortive. It was supposed that the EmperorNapoleon had used this affair as a part of his system of concessionsto the court of Austria to engage them in the French alliance, andthe interests of holders of French bonds were consequentlyabandoned.

England having taken the chief hand in ocean steam navigation,


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Quasi-Sovereign tates, Owing by Foreign Countries. 7

it became the main seat of the gold and silver market, and theextended use of gold has favoured this tendency, notwitnstandingthat French subsidised steamers now compete with ours n tne East

and the West. The bullion is, however, argely mported on foreignaccount, and passes of course to the continent, which gives rise toill-founded comments and statistics as to gold leaving us or beingtaken for the continent. The small French, Genoese, and Catalanshopkeepers of South America, as they cannot ship produce, practically ship bullion, which in the end has other destinations thanLondon. The operations of London as a bullion market, have afurther tendency to give it supremacy as a money market. This isalso favoured by exchange on London being preferred by bill purchasers abroad to exchange on Amsterdam, Hamburgh, or even onParis.

London has, in fact, such advantages as a market, that in caseswhere the loan is really a foreign one, and taken up on foreignaccount, it has been found worth while to pay an English house avery large commission o lend its name for the issue. This was sowith an Hungarian loan which had been taken by a Germansyndicate, and which, by being made of London issue, becameworth 2

percent. more. Other cases of this kind have occurred

when an enormous price has been paid for the loan of a Londonname, ten times more than would have been given for an ordinarycommercial transaction. In most instances, parties who havereceived such commission, have bitterly regretted it. One of thelargest houses was offered 80,000/. for lending its name to a loan,which was all subscribed, and on which there could be no apparentrisk.

Such practices of using names have been consequent on what is

called the"

syndicate"

system. The name is new, but the practicehas always subsisted ; but, in reality it is now applied under suchcircumstances as to bring about some new results. The practicewas in Holland, and in this country, to form combinations ofhouses for a loan transaction. Then each house applied to friendsand customers to co-operate, dividing commissions with such subscribers. Such was the case in competitions for English loans inthe beginning of this century between the Goldsmids and theBarings. The great houses continued this practice of making alist for a new loan, and giving their customers the opportunityof becoming original subscribers. The consequence was, that theBarings or Rothschilds were, by the very nature of circumstances,bound to stand by their friends and customers.

It will be seen that the old lists were formed of investorscustomarily associated with a firm of standing and reputation.The later syndicates consisted of capitalists and speculators all over


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Europe, whose object was to pay no money, and make the largestamount of profit by every means. The chief of the operators waspossibly not in a position to bring out the loan, even if the publi

cation of his name would not have been a sufficient warning to thepublic to have nothing to do with it. Hence originated the practiceof getting a mercantile house to issue a loan for a commission, asthey would have carried on the shipment of produce, ts assurance orany commercial transaction.

While the old financial firms called themselves contractors forthe loan, the firms acting on commissions styled themselves agents,and scrupulously professed to be no more, and to be acting only onthe account of others. The public did not know the difference, butwhen the early default took place, the bondholder on applicationwas told that the house were only agents on behalf of someone inFrankfort or elsewhere, and that they had had no original connection with the loan, knew nothing of the country for which itwas raised, had no influence there, and left to others to exertthemselves for the fulfilment of the conditions.

Whereas formerly only a few houses of stability were engagedin loan transactions: of late, all kinds of persons have been so

occupied,not to the public benefit.

A circumstance which has favoured the issue of foreign loans inLondon, as compared with other markets, consists in the facilitiesoffered by the London Stock Exchange, and the lax administrationof the criminal law. While the Stock Exchange has justly earnedthe confidence of continental investors by its severity on foreigngovernments guilty of breach of engagements, it has affordedfacility and even countenance to the operations of adventurers.The unchecked freedom of transactions is seldom surpassed in any

foreign market, but the constitution of the London Stock Exchangeas a close market has enabled its committee o give currency o loantransactions supposed to have been examined and approved. Therepresentations made to the committee as to amounts subscribed,are now known not to have been always well founded, and itsmachinery has consequently been applied to cover fraud.

These facts were too well known to persons on the continent,and the absence of a public prosecutor, or rather the non-executionof his functions as such by the Attorney-General and Lord Advo

cate, gave this country the preference for the issue of any schemes.Even in Paris, lax as was the administration of the Empire, theauthors of one of the defaulting loans were placed in custody.

Unfortunately all the loans issued in London were not raised forreproductive purposes, or under honest agency. This class ofbusiness attracted the attention of a set of unscrupulous practitioners vvho found London and Paris convenient centres for


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action, and whose proceedings in some instances were nothingbut swindling. The fair conduct of those governments, whichhad raised loans through the great houses of the Barings and

Rothschilds, or other respectable mercantile agencies,had

inducedmany to place their money with advantage in foreign loans.The new competitors or this business also assumed an English

garb; abroad they passed as English bankers and merchants ; inreckless scheming, they were abetted by unprincipled adventurersfrom the United States. Agents of the so-called London housesoffered enormous bribes to the presidents and officials of the SouthAmerican States, and to the ministers of European Powers, togrant railway contracts or to issue loans. The looseness and

corruption of the imperial regime n France, and the indifference ofthe English police authorities, allowed nefarious frauds, by personsof criminal antecedents, to pass unchallenged. Thus the materialswere laid for a scene of unparalleled disaster, which is most inadequately depicted n the report of the House of Commons Committeeon Foreign Loans (from the investigations of which Committeeseveral notorious cases were excluded), and which has inflicted notonly pecuniary, but moral and even physical distress, on everyfamily of Western Europe which had the industry to secure and thethrift to save.

Of the extent of this disaster no statistical estimate can betruly formed, figures may be given, but their true bearing atpresent we do not know.

The evidence of abuse has no necessary connection with use, noris it in contradiction to it. The heavy losses of individualsthroughout Western Europe, from investments in foreign loans,have called attention strikingly to the subject, but they are not

conclusive as to the commercial relationsof

foreign loans. Indeedthe most serious losses will be found to be consequent on fraudulent transactions; and whatever freedom may be allowed to tradein a well-ordered commuuity, it is an agreed principle that nofreedom should be allowed to fraud; which is not to be dealt withby economical principles, but is within the domain of politics, to bedealt with on other considerations.

III.

In 1871 the late R. Dudley Baxter, F.S.S., read before theSociety a paper on National Debts. This contains some interestingmatters on the growth of the debts of several States.

With regard to the amount invested in foreign loans, Mr. Giffenhas attempted to ascertain this in his paper on recent accumulationof capital in the United Kingdom, read before the StatisticalSociety, 15th January, 1878.


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This he has not succeeded n to his own satisfaction, and if thesubject has baffled one so well able to deal with it, it may beconceived there are difficulties.

In his Table V, he makes the total amount of interest in 1878in foreign funds, to be 40,250,000/.; it appears he takes the value atabout 400,000,000/. This to my mind does not appear to be anyexaggeration for any practical purpose of general comparison. Itis most likely 500,000,000/. or 600,000,000/. nominal.

Mr. Ernest Seyd (paper on " Our Wealth, in Relation to Imports" and Exports, and Causes of the Decline in the Latter," " Society"of Arts Journal," 5th April, 1878, p. 406), says of our "inter-" national " wealth in foreign State stocks and colonial stocks, that in1872 we held an amount which

maybe stated at

650millions. In

colonial, continental, American and other railway and public works,shares or debentures, the amount held by us is estimated at 210millions.

The "Economist " (6th April, 1878, p. 396) says that it wouldappear from the statements published from time to time in the" Investor's Monthly Manual," that the amounts invested by theEnglish public have not been less probably than 275 millions inthe last four years. What this means does not, however, appear,for in the same time a

largeamount of

stockhas

been disposedof.

Mr. Giffen, it will be seen, rates the annual income on foreignfunds at 40 millions. We shall now see what the holders are represented to return to the Government.

While writing this paper a parliamentary eturn has appeared,being a return of the Annual Value of property assessed to incometax under Schedule C, distinguishing the amounts assessed ondividends from British, Indian, Colonial, and Foreign stocks, in theyears 1876-77, in continuation of Parliamentary Paper JSTo. 09 of

session 1874.The return has not come into my hands, but it is published nthe " Economist," with the parallel returns of 1874 (6th April,p. 396). This I reproduce with several corrections of my own,which put it in a better shape, and alter the figures of increase anddecrease.


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ColoniesndCountries.

BritishIndian.Colonial, iz.

CanadaGibraltarCapeColonyNatalSierra eoneNewSouthWalesQueenslandSonthAustraliaVictoriaWestern ustraliaTasmaniaNewZealandCeylonMauritiusAntiguaBritishGuianaDominicaGrenadaJamaicaSt. KittsSt. LuciaTrinidadSt. Helena

Foreign, iz.EuropeAustria

BelgiumDenmarkFranceGreeceItalyNetherlandsPortugalRoumaniaRussiaSpainSwedenTurkey

AsiaChinaJapan

AfricaEgyptMoroccoTunis

YearndedthApril,877.

Amount

ofDividends

and nnuitiesChargedoIncomeaxunderSchedule.

1,026,8161,104

147,83533>4293,000

475,343280,489167,30869^,239

7045,977

75^98734*7*862,3741,7104,092300

28014,492

3H1,8515,37i

987

644,7788,1168,664

60,9072,000

i44,965475

438,72396,784

2,360,872169,50592,330

386,604

44,698212,833

1,739,4686,992

347

Total.

20,829,2817,068,327

3,755,106

YearndedthApril,873.

AmountofDividendsand nnuitiesChargedoIncomeaxunderSchedule

755,o891,320

119,39017,2141,491

447,777186,244102,914582,24748,761

436,3894,95964,8181,608

13,480280

14,010432720

3,867766

H5,9422816,662

259^942,130

157,2711,496

350,48o118,972

1,825,355759,06657,795

Ij747657

73-44

1,308,31112,093

75

Total.

21,160,4807,032,247

2,839,776

Increaseupon 873.

36,080

271,727

28,44516,2151,50927,56694,24564,394

111,99270

316,598

102

300

482

1,1311,504

221

528,8368,o8

88,243

535,517

34,535

44,698*39>393

43i,i57272

Decreaseupon 873.

331,199

216

2,784

6,2312,444

9,388

108

7,998198,287

13012,3061,021

22,188

589,561

1,361,053

5,101


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Year ndedthApril,877.Year ndedthApril,873.

Increaseupon873.oloniesndCountries.

AmountofDividendsand nnuitiesChargedoIncomeaxunderSchedule.

Total.

AmountofDividendsand nnuitiesChargedoIncomeaxunderSchedule.

Total. Decreaseupon 873.

AmericaArgentine epublic

476,923737,9i35i,9562,5298,426

24171256,820

i,749

8,315,563

402,190533,398217,35944,6462,220

117,652450,474209,095161,205

101,013107,32310,781

152,6596,68718,324

9,340,993

74,733

204,512134,59117,8836,206

47,725

ChiliColombia South

117,628450,303

159,456

101,013

Returns iven n 1874butomitted n 1878.

Foreign

107,32310,781

152,6596,68718324

otal 39,968,277 40,373,4963,268,970 3,674,189

In this case we have an exhibition of figures in great detail, butthey only aggravate our difficulties. It is evident the return ofUnited States stock cannot be correct, nor that of French; and

those tfor the Netherlands, Belgium, Germany, and Denmark arevery doubtful.Figures possibly nearly correct are China, Japan, Morocco,

Tunis, Argentine, Brazil, Chile, Columbia (less Dutch holding),and Uruguay.

As against decrease allowance must be made for sinking fundoperations on Russia, China, Japan, Egypt, Morocco, Argentine,Brazil, Chile, Columbia, and purchase by the United States.

From the return it is impossible to ascertain how far railwaystocks are included under Russia, Roumania, Sweden, Argentine,Brazil.

These figures, ncluding loans in default, only account for about200 millions capital and 11 millions of yearly dividends. According to these figures the yearly loss at present would be only about3,ooo,oooZ.

Any calculation of profit or loss must be in proportion to the


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relation of these foreign investments to the whole capital of thecountry.

The precise nature and extent of the operations arried on in theLondon loan market cannot be ascertained or appreciated. In thetables included in this paper, large figures are dealt with, butthey afford no totals, for the real value of the figures cannot beascertained. If for instance we know the amount of a loan issuedin this market, it does not help us, as a considerable portion hasalways been on foreign account, for Hollanders, Spaniards, &c, andof late years for Germany. Then as an international exchangeablepaper is created, this is always floating to and fro.

The mode in which money has been taken up is sometimes

obscure, for it has not been always by direct subscription here. Inthe case of some of the American State loans, dollar bonds havebeen mortgaged here, and a portion sold to private holders, whichhave never come into the market. One highly respectable irm hasdurino- many years placed among its own connections many smallAmerican railway and town loans.

In 1837, if not before, a system was in operation n the Londonmarket which has since been carried out directly and indirectly ona large scale. Already the stability of England had drawn atten

tion to the advantages of this market. As most of the stocks ofEurope were what is called internal stocks, like consols, they wereonly payable in the national capitals. They were in bonds tobearer, then little used in England, as the policy of fiscal administration and of legislation favoured nominal subscriptions, orholdings in the name of the investor, only changeable by a formaltransfer ; whereas in France and on the continent bonds and sharesto bearer were largely adopted. It is right to note that thefacilities since

givenin this respect have produced the same result

here as on the continent, in favouring investment and consequentlyenterprise and thrift, and also as a consequence, raud. " Nominal

"

holdings, it is to be noted, can only be redeemed by purchase inthe market, or by redemption of a whole loan. Thus the processof redemption is not encouraged. With bonds to bearer, besidesthe other two modes of redemption, redemption can take place bydrawings, large or small.

It occurred to financiers here that foreign internal stocks might

be made available here, and at the same time an opportunity beafforded for English operations n them. Mr. John Field, in hisable edition of " Fortune on the Funds," for 1838, observes withregard to Dutch Five per Cents.:

" Manypersons ntertain n objectiono any fluctuationn the amount ftheirdividend, nd uchmay ecure hepayment ftheir ouponst the fixed ateof aJ. is. 3d. each,by the purchase fbonds ith an English heet attached o


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14 Hyde ClaekeOn the Debts of Sovereign and

them, nthe followingorm:1837. Dutch Five per Cent. Loan. PL 1,000capital, ayable alf-yearly,nthe 1st April nd1st October f each ear. Theundersigned ereby ivenotice hat he coupons rdividend-warrantselongingothe accompanyingond,payablen Holland, ommencing ctober st, 1837, andendingApril1st, 1847,will,after receipt f the nterest n Holland, lsobe

(atthe option f the holder) ayable t their officen London, t the fixed rate oftwopounds neshilling nd hreepence terling or each coupon f twenty-fiveguilders f the present urrency fHolland.Signed,. &J. Salomons." It willbeobserved," aysMr. Field, " that the advantage f anyalterationin the exchangebove he fixed ate s hereby iven o the holder f these bonds,the premium n which anges t present rom to ii per cent."

This process was largely adopted for the sale of what were calledRussian Metalliques. For several years portions of successive loansto cover the deficiencies n the Russian budgets were thus madesaleable n this market, exclusive of direct loans. After the Crimeanwar numerous oans and railway loans were issued in a direct form.

This process was adopted for an Austrian loan by Messrs.Rothschild, and is thus described n 1838 by Mr. Field, in 'Fortune" on the Funds :"

"Austrian Five per Cents.Dividendsue 1st May and 1st November,payable t Vienna ndat N. M. Rothschild Son. Bonds f 1,000 lorins ach,or iooZ. terling, t the ixedexchange ffi. io perpound terling.

"The dividendsnthis stock re payable t the Treasury, ienna,n effective

conventionallorins; ut the plan f a fixed ividend, ayable t appointed gents,has been ound opalatable o the Englishpublic,hat advantage asbeen akenof it to circulate, rom ime otime,portions f the Metalliques y attaching othe German onds n English heet, containing n engagement n the part ofMessrs. othschild o pay thedividends, hendue, t the said ixed exchange ffl. io per pound terling, r -it. ios. per coupon."

The Italian loan of 1863, raised by the House of Rothschild,was only offered on the London market to the extent of 3,000,000/.The loan, however, was for 28,000,000/., and as the coupons were

made payablein

Turin, Paris,and

London,at the

exchange of25*30frs. per pound sterling, the effect is that the whole of the loanof 28,000,000/. s available for sale in this market, or the whole ofa half-year's coupons of 7oo,oooZ.may become payable here. Thisis a very good illustration of many of the later operations, and ofthe consequent difficulty n dealing with the figures.

The London market has great advantages for transactions inwhich security and convertibility are the chief requisites. It hasthus happened for a long period, and more particularly since the

prevalent use of bonds to bearer, that the preference is given topaper having coupons paid in London.

In ordinary times the paper is kept at home, and the couponssold or remitted to London. In times of political alarm the paperis deposited n London, and the coupons received there on holder'saccount and at his disposal.

At all times the bonds are a convenient document for remittance


18/53


from market to market, being of general acceptance, and havingthe London standard.

There is, however, one possible danger in times of panic here,that it

maybe impossible for English holders to sell in the London

market, as a number of foreign sellers offering may still furtherdepress prices and paralyse the market.

iy.The following table shows the issues in the London market, so

far as it is possible to describe them:

[000'smitted.]

YearofIssue. KateofInterest.Per ut.

1794 31797 3

1803 6

1810? 3

1817 5

1818 5

1822 6 6

j, 5

65

1823 5,j 5

1824 53,

J,

66

5556

NamefState.

Germany, mpire...

Germany, mpire...

UnitedStates

Portugal

France

Prussia

ChiliColombia,

DenmarkPeruRussia

AustriaPortugal

BrazilBuenosAyresColombiaGreeceMexicoNaplesPeru

Total mountofLoanContractedor.

4,600,1,620,

895,

5,000,

1,000,2,000,

3,000,1,200,3,5,

3,300,1,500,

1,686,1,000,4,75.

800,3,=00,2,500,Balance

AmountfLoanssuedinLondon.*

4,500,

1,620,

895,

1,000,2,000,

2,000,450,

3,500,

3,500,1,500,

1,686,1,000,4,750,

800,3,200,2,500,

- 750,

PriceofIssue.

Per nt.

70

77t

87

{8588595891^

Agentsor ssue.

Boyd,Benfield, ndCo.

Boyd,Benfield, ndCo.

London, Amsterdam, ndParis, orLouisiana

Appears o havebeenmadefrom. SinkingFund, butsoldseparately

Saleof Rentes by Baringsand Hopes

Rothschild ndSons

HullettBrothers ndCo.Herring, Graham, andPowlesf A.F. Haldemand ndLB.F. GoldschmidtfFry and ChapmanRothschild ndSons

Rothschild ndSons

Rothschild ndSonsThomasWilson nd Co.BaringBrothersB. A. Goldschmidt ndCo.A.Laughinan ndCo.B. A.Goldschniidt ndCo.Rothschild ndSonsFry and Chapman

WhenPartly

the exact mount s not stated,issued n 1845.

the full amount s given s issued n London.


19/53

16 Hyde ClakkeOn the Debts of Sovereign and

[OOO'smitted.]YearofIssue.

fiateofInterest.

Per nt.1825 5JJ 3} 59> 5

66

3} 6

1828 51829 51831 51832 5

51833 5

3> 556

1834 6J5 5

1835 31836 4

,5 56

1837 6

1839 51842 31843 51849 51850 5

>, 4*1851 5

1852 5>, 4*>, 4

1853 4*>, 4*

NamefState.Total mountofLoanContractedor.

BrazilDenmark

GreeceGuatemala.,MexicoPeru

SpainBrazil

Portugal..RussiaPortugalGreecePortugalRussiaPortugal

Spain-CubaSpainPortugal

Belgium..Florida"..Portugal

PortugalSpain-CubaBrazil.

Chili

Brazil

Denmark

DenmarkRussia

Sardinia.

AustriaBrazil....Sweden

Peru

2,000,5,5,i,ooo,2,000,1,429, *.3>20O,

616,

600,

800,

2,000,

6,000,60O,

2,344,2,000,3,000,1,000,

45o,4,000,6,000,

1,200,200,900,

1,000,"3,

313,

757,732,

800,

800,5,500,

3,563,

3>5oo,1,041,45o,

2,600,4o,

AmountfLoanssuedinLondon.

4,000,3,500,2,000,

167,3,200,

616,

600,

800,

2,000,

600,*

2,344,2,000,3,000,1,000,

450,4,000,6,000,

1,200,200,900,

1,000,113,

313,

757,

732,

150,

800,5,500,

3,563,

2,250,1,041,450,

2,600,400,

PriceofIssue.

Per nt.8575

5*i7389i78

54

9*1

10048

94

607o

9280

78

8586

9093

85

909593

85{

Agentsor ssue.

Rothschild ndSonsThomasWilsonand Co.See1822Ricardo ndCo.Barclay,Herring, ndOo.

Fry and Chapman

Thomas ndWilliamKingRicardo ndCo.

Bai-ing rothersRicardo ndCo.

Rothschild ndSonsRicardo ndCo.BaringBrothersI. L. Goldsmid

WrightArdoin nd RicardoRothschild ndSons

T. Wilson ndCo.I. L. Goldsmid

I. L. Goldsmid

Thomas ndWilliamKing

Baring rothers

Sir I. L. Goldsmid

C.J. Hambro nd Son

C.J. Hambro nd SonBaringBrothers

C.J. Hambro nd Son

Rothschild ndSonsRothschild ndSonsPalmer,McKillop, ndDen

C.de Murieta nd Co.C.J. Hambro ndSonJ. Hegan and Co.

* Indemnity fbonds ssued o meetclaims.


20/53

Quasi-Sovereign tates, Owmg by Foreign Countries.

[OOO'smitted.]

17

YearofIssue.

KateofInterest, NamefState.

Total mountof LoanContractedor,AmountfLoanssuedinLondon.

PriceofIssue. Agentsor ssue.

1854

1855j

1858

1859

1860

1862

1863

1864

1865

Per ut.

44

4*4*4*6

35

4*4*

477554*356

4*67

53

'{557

54*55

Turkey

TurkeySardinia.

Brazil...,ChiliSwedenTurkey

RussiaAlabama

Brazil-RussiaDenmarkEgypt first ssue)

(secondItalyMoroccoPeruPortugalRussiaTurkey

BrazilColombiaConfederate tates

ItalyPortugalDanubian rinci-"

palitiesDenmark

Egypt-Mexico (Anglo-"

French) JRussia (Anglo- I

Dutch) JSwedenBrazil.Italy

3,000,

5,000,2,000,

1,5^7,J5551,229,5,000,

7,000,100,

i,373,8,000,

560,2,T95,1,098,1,782,

5DI,5,5oo,5,000,

15,000,8,000,

3,820,200,

3,ooo,

28,000,2,500,

916,1,200,

728,5,704,

12,365,

6,000,2,223,6,800,8,000,

3,000,

5,000,

1,527,1,555,1,229,

/ 4,380,

I 620,4,000,

100,

1,373,5,000,

560,2,195,1,098,1,338,

501,5,500,5,000,

15,000,8,000,

3,820,200,

3,000,

3,000,1,250,

916,1,200,

728,5,704,

8,000,

6,000,2,223,

6,800,8,000,

Per nt.80

102IIOO

969294*8562*66i

9092

9i82*84*74

35{934494

8690J

7i48

86-j9394*93

.,{

>{

7477*

Dent,Palmer, ndCo.

Rothschild ndSons

Rothschild ndSonsBaringBrothersRicardo ndCo.

yDent,Palmer, ndCo.

Thomson, onar, ndCo.Reid rving nd Co.Rothschild ndSonsBaringBrothers

C.J".Hambro ndSonFruhling ndGoschen

C.J. Hambro ndSon

Robinson ndFlemingP. P. BlythHeywood, ennard,ndCo.Knowles ndFosterRothschild ndSonsOttoman ankC.Deyanx nd Co.Rothschild ndSonsLondon ndCounty ankSchroder ndCo.Erlanger ndCo.Rothschild nd

SonsSternBrothersOttoman ankSternBrothersC.J. Hambro ndSonRaphael ndSonFruhling ndGoschenGlyn,Mills, ndCo.Int. Fin. SocietyCreditMobilier ocietyBaringBrothers

Hopeand Co.*

J. H. Schr5der ndCo.Rothschild ndSonsf General Credit and\ nance Company

Fi-

* Partly ssued n Amsterdam.


21/53


[OOO'smitted.]

YearofIssue.

1865

1866

1867

1868

1869

RateofInterest,Per nt.

565

6777{

4*{

4*{

NamefState.

PeruTurkeyAustria

Argentine Con-1federation JChili

,3EgyptEgypt bydeben- 1

tures) JRussia

ChiliDanubian rinci-polities J

EgyptHondurasHolland Dutch-"1

IndianRailway)PortugalRussia (NicolayRailway, first Vissue) J

Russia railway)

TunisMassachusetts

Argentine Con- lfederationJEgypt

HnngaryItalyRussia railway)

Sweden

AlabamaGuatemalaItalyHolland (Dutch-

IndianRailway)Peru PiscooYea"1Railway) J

Portugal


I0,O00,6,000,

i4>584>

55-45o,

1,121,3,387,3,O00,

6,000,

2,000,1,264,

2,080,

I,00O,

339,5,500,

12,000,

1,694,4,500,4,000,

4!3,

1,95,11,890,8,512,9,405,1,920,4,349,1,716,M5>

1,044,500,

5,200,

290,12,000,

AmountfLoanssuedinLondon.

9,000,6,000,

550,450,627,

1,694,3,000,

6,000,

2,000,1,264,

2,080,

1,000,339,

5,500,12,200,

4,500,4,000,

413,

1,950,11,890,8,513,9,405,1,920,2,000,1,300,1,150,

1,044,500,

5,200,

398,290,

12,000,

PriceofIssue.Per nt.

83*65*66^0-

7H92*92yo9286-T

71

90-80

61

77*6377

72*757i*81^788080908170*73*

91*7i32*

Agentsor ssue.

Thomson, onar, ndCo.*Ottoman ankAgraBank *BaringBrothersHopeandCo.Thomson, onar, ndCo.Morgan ndCo.Anglo-Egyptian ankFruhling ndGosohenBaringBrothersHopeand Co.

J. S.Morgan ndCo.Fruhling ndGoschenOttoman ankOppenheim ndCo.Bischoffsheim nd Gold-

schmidtHolstman ndCo.SternBrothersBaringBrothersHopeand Co.Baring rothers, ontinental FirmsThomson, onar, ndCo.E. Erlanger ndCo.*J*Baring rothers

J* aringBrothers\Hope and Co.Ottoman ankLondon ndCounty ankSternBrothersBaring rothersRaphael ndSonsJ. H. Schroder ndCo.Raphael ndSons

J. H. Schroder ndCo.||Thomson, onar, ndCo.Anglo-Italian ank

SamuelMontaguendCo.

Thomson, onar, ndCo.SternBrothers

* A conversion peration. f Placed hiefly broad. J A conversion. A conversion f 1866 oan. || Partially ssued n America.


22/53

Quasi-Sovereign tates, Owing by Foreign Countries.

[OOO'smitted.]

19

RateofInterest. NamefState.Total mountof LoanContractedor.

AmountfLoansBuedinLondon.PriceofIssue. .Agentsor ssue.

Per nt.7

7*

4

6

6576

io965

*{55656 I

Roumania (Bncharest o GiurgeroRailway)...Roumania railway)

Russia (Nicolay |Railway, econdVissue) J

Santo Domingo

TurkeyAlabama gold).BuenosAyresChiliEgyptFranceHondurasJapanPeruMassachusetts

Roumania (iron 1bridges) JRoumania (rail- 1waybridges) JRussia

Spain quicksilver)

Argentine epublicBrazilCosta Rica (first"!

issue) JCosta ica second 1

issue) JFranceHungaryLiberiaLouisiana Livee)Holland (Dutch- I

Indian Railway)ParaguayRussiaSpain (national

lands) j

TurkeyUruguayBoliviaCostaRica.Entre Rios.

436,V

i,5o,11,110,

758,22,222,

400,1,035,",013,7,142,

10,000,2,500,1,000,

11,920,620,434,600,

12,000,2,318,6,122,3,400,

500,

50)

80,000,3,oco,

ico,400,189,

1,000,12,000,2,623,

5,700,3,500,1,700,2,400,

227,

435,-11,500,

11,110,

758,

22,222,

400,1,035,1,013,7,142,

10,000,2,500,1,000,

11,920,620,434,600,

12,000,2,318,

6,112,3,400,

500,

500,

3,000,100,

4,000,189,

1,000,12,000,2,623,

5,700,3,500,1,700,1,496,

227,

Per nt.907i!

*{

70J6O*

94*888378*8580J9882*8786728080

7482}

85

90*8081*80

737266

C.Devaux nd Co.

Anglo-AustrianankBaring rothersHopeandCo.Lawson nd SonE. Hartmon ndCo.fComptoir 'Escompte\ LouisCohen ndSonsJ. H. Schroder ndCo.C.deMurrieta ndCo.J. S. Morgan ndCo.J Bischoffsheimnd Gold-\ schmidtJ. S. Morgan ndCo.Bischoffsheim nd Gold-

sehmidt, efevreJ. H. Schroder ndCo.

BaringBrothers

C.Devaux ndCo.Anglo-Austrian ankRothschild ndSons

C.de Murrieta ndCo.Rothschild ndSonsBischoffsheim

schmidtand Gold-

'-{90

J Baring rothers\ Rothschild ndSonsRaphael ndSonsHolderness,Nott,ndCo.fRobinson nd FlemingSamuelMontague ndCo.Robinson ndFlemirgRothschild ndSonsSternBrothers

Dent,Palmer,nd Co.

Thomson, onar, ndCo.Lumb,Wantlyn, ndCo.Knowles nd FosterE. Erlanger ndCo.fC.de Murrieta ndCo.

* Withdrawn. Therewasno published gency ouse or this oan,but Messrs. ischoffsheimand Goldschmidt ere mployedo take harge f the bonds. t Not whoDy laced.


23/53


[OOO'smitted.]YearofIsBue.

1872

1873

1874

1875

1876

1877

1878

RateofInterest.

Per nt.855

">{

5965

3675

554*4*5

4*4*54*

6

354

4*4*

NamefState.

ParaguayPeruRussiaHonduras (ship I

loan) JRussia railway)TurkeyBuenosAyresChili

EgyptHungary

JapanRussiaTurkeyUnited tates

Argentine epublicBelgiumHungarySanta e"TurkeyBrazilChiliRussiaSwedenMassachusetts

ChinaSwedenNorwayPortugalUnitedStates

ChinaHungary

PortugalTurkeyUnited. tates

SwedenNorway


2,0O0,36,000,l5,COO,15,000,

1,760,11,126,

2,041,2,277,

32,0O0,5,400,7,500,2,400,

15,000,27,778,

358,*1,440,7,5oo,

3o,40,000,

5,000,1,900,

1*j,ooo,982,3Jo,

275,2,000,1,320,

306,

1,604,8,ooo,

6,500,5,ooo,

343"i61*700

AmountfLoanssuedinLoudon.

562,15,000,15,000,15,000,

1,760,11,126,

2,041,2,277,

5,400,7,500,2,400,

15,000,8,000,

358,*1,440,7,500,

300,15,900,

5,000,1,133,

15,000,982,310,

275,1,500,

13,200,306,

1,604,8,000,

6,500,5,000,

343*161*700

PriceofIssue.

Per ut.8577*8980

87*98*

9*94{84*808992*9358*

102$-

8075*91*9243*

96*

9298J

96*96*

83*

552

9795

Agentsor ssue.

Robinson ndFlemingJ J. H. Schroder ndCo.\ SternBrothersRothschild ndSons

C.J. Hambro ndSonRaphael ndSons

BaringBrothersOriental ankingCorporation/ Bischoffsheim nd Gold-\ schmidtRaphael' ndSonsRothschild ndSonsf Oriental ankingCorpo-\ rationRothschild ndSonsOttoman ankBaring rothers, c.f

SternBrothersBaringBrothersRothschild ndSonsC. de Murrieta ndCo.Ottoman ank

Rothschild ndSonsJ"Oriental anking Corpo\ rationRothschild ndSonsE. Erlanger ndCo.BaringBrothers

Hong Kongand ShanghaiBanking orporation

C.J. Hambro ndSons

IB

J Societe des Dep6ts\ Comptes ourantesBaring,&c.*J"

et

Hong Kongand ShanghaiBanking orporationRothschild ndSons

BaringBrothers

Ottoman ankBaring,&c.||

Erlanger ndCo.1TC.J. Hambro nd Son

* Withdrawn. Therewas no published gency ouse or this loan,but Messrs. ischoffsheim nd Goldschmidt ere mployedo take charge f the bonds.t A portion f conversionn this market. X Funding perations ontinued S d ot o havebeen ubscribed || F di i ontinued


24/53

Q'tasi-Sovereign tates, Owing by Foreign Countries. 21

The amonnt of the national debts of Enrope n 1788 was about540,000,000/. Mr. Dudley Baxter makes those of the whole worldin 1873 508,900,000^., ut then he has taken the debt of France at

the forced reduction of 32,000,000^Mr. Ernest Seyd (" Society of Arts Journal," p. 406) makes thetotal amount 4,500 millions. Using the figures he gives, but in adifferent way, the holdings would be:

EnglandFrance....

GermanyHollandBelgiumAustria

Own ebt.

Mlns.7857501658036

346

Others.

Mlns.650450400502020

Total.

Mlns.1,5001,200

550120300

The same distinction, as Mr. Seyd makes, must be drawnbetween holdings of our debt or mortgages on one's own propertyand holdings of " international" property. Still, for certain purposes, the above figures give some relative ideas of the wealth of themonied classes. It is however most likely that France s thus placedtoo high, as perhaps also Germany and Holland too low. Theseshould at all events be 500 millions and 100 millions.

V.It has been suggested that it would be far better were the

national capital employed in home works, instead of being lent toforeign countries. So far as an individual is concerned, whetherhe loses i,oooZ. in a bubble company here or in a swindlingforeign loan, the operation and the sequel are the same, but sofar as the economical operation is concerned, home investment forpublic works, and the transactions of foreign loans, are under verydifferent conditions, as I have explained in my treatise on " The" Theory of Railway Investment," 1846. Our whole population,under the institution of the poor laws, must be fed, and in this wediffer from many continental countries. Although the feeding ofthe population s provided for, there is no provision for the effectiveapplication of its labour. Thus there is commonly a surp]us oflabour

beyondthe labour

employedin the

productionof food

andother recognised products, and particularly during a period offamine.

Additions to the permanent capital and working plant of thecountry are made from his surplus labour, as the Pyramids and greatundertakings of Egypt were made from the surplus labour of thatcountry. Were there any adequate organisation in a period in


25/53

22 Hyde ClaekeOn the Debts of Sovereign and

which other employments were slack, the national industry wouldbe employed in improving the dwellings and public buildings of thepeople, in draining the soil, in embanking the rivers, recoveringlands, promoting isheries and mining, making harbours, and otherwise adding to the yearly production and permanent plant.

The conduct of foreign loans or of any branch of trade with ourcolonies or abroad, or obtaining new materials or food for the stateof our produce, has no necessary connection with our home work,and could and should be carried on apart. Indeed, if there be aprofit obtainable rom our business in foreign loans, its abandonment would be a loss and not a benefit to our resources. At thistime, and so long as we retain the position, we have an internationalmoney market, and it is desirable we should retain its advantages.

Although this paper is chiefly devoted to loans of foreign states,no such line can really be drawn. The loans of foreign cities, forinstance, approximate to these in character. A larger amount ofallied transactions is constituted by the issue of foreign railwayshares, but to a greater extent of foreign preference shares, debentures, or obligations.

Town loans are always to a great degree locally subscribed, butCanadian, United States, and colonial town loans are likewisebrought here. In such cases the dividends are rarely payable nLondon, so that a character naturally to be found in foreign loans ishere wanting.

The continental town loans being mostly lottery loans, redeemable by prizes, are negociated abroad, as they cannot be issued inthis market, any more than the railway lottery loans.

The lottery or premium drawn by lot is a characteristic f foreignmarkets, it being considered hat the lottery laws forbid their being

advertised here.Railway loans are of many kinds, and properly speaking, theIndian railway operations should be embraced under this title. Insome cases the companies are English or quasi-English, and managedhere. Others are nominally foreign companies, but in realitydomiciled here, and having a foreign guarantee. All such dividendsare payable in London. A large amount consists of debenturesmade payable in London, and issued by some house here eitherdirectly on account of a Government, or indirectly in the name of a

company.Such railway loans are in most cases, with such an exception asthe Lombard, &c, to be distinguished from State loans, becauserailway and State loans, being limited in amount, after a time, andparticularly after absorption by local holders, cannot supply stockenough to work more than one market.

Colonial and Indian loans are not to be distinguished for most


26/53


purposes from foreign State loans, but it is convenient n the presentinquiry not to include them, as their features may only distractattention. They, however, present these circumstances, hat theyare largely connected with the employment of English iron andproduce, and are partly supplied by the capital of those who havelived in the countries concerned. Some of the colonial loans arealready being employed for local investments.

Of the extent of such operations, as already said, we are in noposition to form any true appreciation. The first difficulty s thatthe nominal amounts are not of common tandard. First with regardto price of issue, and this applies to State loans also, the nominalamount of the loan is higher than that subscribed by the public.

Thus,instead of

idoZ.,he subscribed amount

maybe

90Z.,80Z.,70Z.,60I., 50Z.,&c.So far as economical considerations are concerned, he materials

are still less practicable, for the figures do not sliow us what theforeign Government or company received. In many cases it was avery small portion. In the cases of Honduras, Liberia, and St.Domingo, the foreign Government received next to nothing. Itbecomes a question whether these are to be regarded as foreignloans, or as loans from the public to the persons concerned in their

concoction. So far as Peru is concerned, Peru has remitted theguano hypothecated to the bondholders, but it has been sold oncontractors' account.

Thus although in the name of an Honduras or Liberian bond,our English subscriber may have parted with his money and lost it,and be involved in utter misery thereby, yet as another person hasgot possession of his money, there is no national loss, though that isno satisfaction to the victim.

The figures given in such estimates of issues include conversions

of former operations, which do not constitute effective amounts ofcapital raised.

There is, however, always a demand for such figures, and theyhave been yearly supplied by a Brussels paper, the " Moniteur des" Interets Materiels " (quoted n the " Economist" of 12th January,1878), and these are reduced in "Herapath's Journal," from whichthey are reproduced.


27/53


Financial

Countries.Loans

ofStatesndTowns.

FinancialndCreditCompanies*

Issues.

Railwayand ndustrialCompanies'Capital.

Comparativeotal.

1877.

140,051,3501,604,2768,000,000

175,600

6,434,4886,199,7007,645,100

400,000833,7583,878,869

6,500,00043,600,000

605,9205,000,000

11,304,480150,000

55>i2o

1,600,0002,800,000

118,902

850,000

142,106

57,333,9261,982,5504,245,550

1,156,374185,000

350,000

40,0002,254,280

697,960

140,901,350

1,604,2768,000,000

317,706

75,072,8948,332,250

11,890,650400,000

2,045,2524,063,869

350,0006,500,000

45,240,0005,054,2801,422,7825,000,000

|AsAi

Danubian rincipalities

Great Britain ndcolonies

ItalyLuxemburg, -rand uchy

A^

Totals, 877 230,929,061117,827,091

16,028,5023,322,343

69,237,74624,944,280

316,195,309146,093,714'76 jH


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Issuesof 1877.

Comparativeotals.Countries.

1876. 1875. 1874. 1873. 1872.1 62,650,000 8,857,303 39,684,360 90,620,64080,988,900America all)

274,800 Asia4,025,000 6,097,300 10,538,140 23,97o,375 39,541,890Austro-Hungary

969,980 1,184,683 7,939,736 14,487,056 2,166,820 Belgium1,031,190 989,920 680,000 1,260,160 1,253,932 Danubian rincipalities

88,960 Denmark19,636,411 3,258,492 9,120,797 3,354,804 58,946,246France17,451,805 7,317,750 11,851,190 48,590,475 54,874,418Germany13,658,040 3,3-3,Ho 38,770,560 58,792,430 57,579,290GreatBritain ndcolonies Greece

_ 1,307,624 1,769,640 4,497,534 3,709,933 2,298,294 Holland nd colonies1,865,142 5,382,904 2,350,340 8,205,250 22,923,523 taly 5,600 5,600 Luxemburg, randDuchy1,320,000 990,000 2,159,000 67,500 Norway ndSweden

m 306,400 60,000 Portugal16,360,000 3,684,000 10,936,855 23,790,52831,013,680Russia1,676,000 1,095,240 460,000 10,224,000Spain3,472,362 3,123,748 12,611,340 3,575,922 4,211,990 Switzerland

' 1,100,000 17,418,750 55,439,78o 39,419,200Turkey ndEgypt146,093,71468,179,820 68,624,202 36,324,853 05,442,183Totals, 877 '76

Increasesn 1877

Unhappily these figures show nothing of the kind, they onlyshow, if correct, that so much stock has been converted n Londonon English and on foreign account.

Thus the figures of the last conversion of Spanish external bonds,would show that not less than 45 per cent, is held in London,leaving the other half only for Spain and the whole continent,including Paris and the Spanish American colony there, andHolland. In Spain there are many holders of external bonds, butwhich come to London, as well as to Madrid, Paris; and throughoutthe continent many conventual establishments still hold Spanishstock.

Out of 12 millions of Austrian stock issued in London, at theconversion of the amount left unredeemed by the sinking fund,only about a million was converted n London.

Many of the loans have been raised at rates of interestnominally moderate, at 5 or 6 per cent., in reality 8 or 10 per cent.,which is still, in many cases, lower than the local rate of the borrowing country. A further premium is in most cases given by aprovision for redemption at par, the loans being issued at a lowerrate.

In most cases of foreign and colonial loans, the wholesome


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provision of a sinking fund has been adopted, which, unfortunately,has not been adequately applied to our home debt, nor so fully as itmight to the colonial and American debts. It may be that theexample of the foreign loans has not been without its influence inthe new general stipulation of redemption for our municipal loanswithin a limited time.

Whereveras in the case of many foreign loansthere is arisk of loss, the amortisation was a necessary condition. Theresult has been, as stated in this paper, that the working of thesinking fund has brought many investors safe home where therehas been an ultimate default in the loan.

Somebody has stated that the issue of a loan below par, onwhich basis most of our own national debt was raised, and redemption at par, is nothing but a lottery, and a dangerous encouragementto gambling. In practice an investor takes a sufficient number ofbonds to give him a fair chance of participating year by year inthe drawing.

The redemption ought to be shortened according o the credit ofthe country, and thus the Morocco oan, now largely redeemed, theJapanese, and the Chinese oans have been constituted.

The redemption clause was not neglected by the manipulatorsof fraudulent loans, in which the highest rate of interest and thehighest rate of redemption were combined.

VI.It may be well at this point to refer to a consideration, not

without interest, whether investment in foreign stocks, so far as thenation is concerned, promotes speculation or thrift.

In what relates to the Stock Exchange, foreign bonds aremade, as everything else is, instruments of speculation, that is of

gambling,and

many personsoutside are led to

engagein such

operations with the almost unavoidable result of their funds beingultimately absorbed n commissions and differences o the membersof the Stock Exchange. Although one gambler may gain fromanother and casually retire, yet the general history of speculatorsis that of the final loss of the capital staked, because at eachaccount twice in a month the fund, or common stock, of thegamblers must be diminished by the portion pared off by themembers of the Stock Exchange and passing into its precincts. Sowith the

individuals,fortunes of

several hundred thousand poundsare recorded to have been dissipated to the last farthing.This is a sufficient comment on the nature of these transactions,

which have no warrant on the ground of mercantile or marketcharacter, and can find no excuse in abstract doctrines of politicaleconomy occasionally quoted in their defence. There can be no


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doubt that great financial houses do make profits by such operations,but then these are really mercantile operations, which they have thefunds to meet. In the case of the individual, he can seldom take

up and hold his stock,and an

operation goodin its

inception,cannot stand against the charges for the recurring account days.In their first transactions, many persons are drawn into foreign

loan investments by the bait of a high rate of interest, notunattended with disastrous consequences others, however, investon the advice of friends, and in a sober way. As, however, nvestorsare drawn from the class of savers, saving instincts predominate nthe long run, and prudential considerations restrain greed. Thereis, however, a disposition to encounter a possible risk with gain.

Within the limits of this paper it is impossible to discuss allthe subjects connected with foreign loans. Among these subjects,one of the principal is, in fact, connected with that discussed byMr. Robert G-iffen,Mr. Stephen Bourne, Mr. Rathbone, Mr. Mun-della, Mr. Ernest Seyd, and others. It is the question how farthese operations affect our national condition. For the consideration of this topic materials have already been given here, but on aquestion of such difficulty, which has engaged my attention foryears, I am obliged to give opinions as well as facts. So far as I

have seen, the funds for foreign loan operations, though originallycontributed from the general national savings, and still partially so,are mainly contributed from the savings made from foreign loanoperations.

This appears to be the case in Prance, and notably in Holland.Any losses that are made fall primarily on this fund, and diminishits means for new operations, and only partially affect the generalresources of the community. As a rule, however widely distributed,investors n foreign oans must be regarded as constituting a class,and

although many new adventurers may be deprived of their propertyby others, for Honduras bonds, or suffer a diminution of interest intheir Spanish dividends, on the whole, the statement here madewill hold good, for the class begin by applying the whole or mainportion of their early savings in investments at high rates.

A limit, however, is set up in time, as it is necessary that thereshall be some safe provision for a wife and family. Thus the proportion of risky venbures s by-and-bye curtailed, and securities arecarefully chosen. Two circumstances tend to govern investments.

As for the sake of drawings it is customary to divide the bondsand to take ten hundreds instead of one thousand; so it becomeshabitual to distribute the investments among several descriptionsof loans, so as to avoid " having too many eggs in one basket,"in case of those casualties which are always borne in mind.

As savings are applied to those investments, so interest received


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and the bonuses on drawings are reinvested, and in very manyinstances the income is never spent. Where, too, persons haveretired from business and are living on their savings, it has becomehabitual and recognised not to spend more than common intereston the foreign bonds held.

Thus, in the long run, the tendencies are decidedly those ofthrift, and this is confirmed by long experience in Holland, and bywhat takes place in France.

One operation by which large fortunes have been made is thepurchase of depreciated bonds at low prices, which are held foryears until they bring double or greater return.

Mr. Giffen has, in " Stock Exchange Securities," dealt minutelywith features n the late crisis, that I

prefer reproducingsome of his

remarks in his words, to repeating the same matter in my ownwords. He says, in Section 2 :

" Theorder f events n the crisis ffords f itselfa very triking onfirmationof the assumption. The difficulties ommencedn the countriesmore r lessfarmed ythe capital f England nd other old countries, hose ndustries renourished ypublic oans rom Eugland ndbythe investment f private nglishcapitalists ithin heir territories, rincipallyn the form of English ron andmanufactures. hecrisis n Austria, hichwas hefirst n the whole eries,wasa crisis n a country nsweringhis descriptiono someextent To the UnitedStates,where he nextgreat rash ccurred,hedescriptions stillmore pplicable.TheSouthAmerican ountries, hose rolongeduffering as he special eatureof1874,are almost domain fEngland and Russia, oo, s largely developed'by English apital. Some f these ountries, specially ustria nd Russia, avenot been exclusively ependentnEnglish apital. Theyhavealsobenefited ythe accumulation f capital n Holland, elgium, ndFrance,whichhad beendrawn argely o Germany efore 873, hrough he French ndemnity, nd hadoverflowedhence ntoAustria nd Russia but the indemnity ayments,houghtheyhelped o precipitate nd aggravate he crisis n Austria, id not alter hepower f that crisis o react n England. ~Ho oubt n 1873,as already oticed,the collapse f the foreign oan inancing ad been oreshadowed;ut he anticipatory vents f that yearwere n themselvesomparativelynimportant,o thatdown o 1875what chiefly appened asa successionfmonetary ndcommercialcrises n countries ependentnEngland, ut rom whichEngland ycomparisonescaped. In 1875 hese riseswere ucceeded ya crisis n England tselfof verygreat ntensity, aturally eading o a renewal f crisis and distress lsewhere,though ot of actual anic, nd the whole ulminatingn the financial isordersof the foreign oancollapses, hichwillprobably orm n after years, he mostconspicuouseature f the whole cries of liquidations. here ppears o havebeen a natural rder, herefore,n the successiverises o which he countriesdependent n England avebeen ubjected,eading o a crisis n England tself,and inallyo a financial swellas a commercialollapse."

There is this observation further to be made in confirmation,that when

English capitalis sent to a

countryfor

publicworks it

stimulates enterprise, but on its cessation a very serious relapsetakes place, just as if an artificial bounty were withdrawn. Thus acountry, the permanent prosperity of which has been advanced, issubjected to the sufferings of poverty, just as Germany was afterthe expenditure of the bounty of the French indemnity.


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Quasi-Sovereign tates^ Owing by Foreign Countries. 29

The connection of loan operations with our foreign trade issufficiently llustrated by Mr. Giffen:

" We havenext o adducen evidence he fact of the great xpansion f thebusiness f investmentn foreign ountries reviouso the depression. hegreatmultiplication f foreign oans n the period s now amiliar. Not to speak fTurkish nd other oans,whichwere so largelymere orrowingsopay interest,therewasa loanof 32 millionsor Egyptafter here ad been arge oans n 1868and 1870. Chili in the same time (1867-73)borrowed ^ millions; Peru,24 millions; razil, 0millions;Russia, 7millions; nd Hungary, 2millions,exclusive f minor borrowings y guaranteed ompanies nd otherwise. Thesewere he nominal mounts f the loans,and he real money r money's orthever ransmitted o those ountries n respect f themmust havebeenmuch essjbut, making lldeductions,hey ndicatemmense irect redit pened p in thiscountryn favour f the States named. The minor orrowings e have referredto were qually mportant,f not more mportant, ndespeciallyn the case of

the United tates, he aggregate f small oans or railways ndother purposeswas mmense. Allthis direct orrowingikewise mplied great nvestment fcapitalprivately n foreign ountries. Merchants nd traders ere nduced oset up establishmentsbroad o facilitate he businesswhich he loans broughtinto existence, nd accommodatehe wants f emigrants o the new fields findustry. The resultwasa luxuriant ndustrial rowth n the new countries ymeans f this vast direct and indirect redit,whichold countries ere giving.Thus n the United States, mmediately efore 873, he length of the wholerailway ystemhad been doubled n seven ears; n Russia lmost he entiresystem f 12,000miles as been reated ince 868; in Austria here ad beenanincrease rom 2,200 miles r> 865 to over 6,000 miles n 1873,and n SouthAmerica, razil, heRiverPlateRepublics, hili, ndPeruhad all beenendowedwithrailwaysn a very ewyears. The oans or hese ountries bove numerated,and especiallyhe above oan of 24 millions or Peru, beingavowedly ll forrailways. Andneverwas here more apid evelopment f the foreign rade ftheUnitedKingdom.The otal mport nd xport rade,which as500,986,000?.in 1867, adrisen n 1873, r n sixyears nly, o 682,292,000^.,r 36 per cent.;and he trade per head rom 16I. s. o,d. o 21Z. s. 9^., or 32 per cent. Theexports f British roduce lone, o take the two extreme ears, ad risen rom179,678,000?.n 1868, o 256,257,000/!.n 1872,or 42 per ent, n four years;the increase er headbeing n the same period rom 5Z.17s. q.d. o 8Z. s., or37 percent. All thishad ollowed rapid ise n previous ears; or hepanic f1866was hieflyhecollapsef a home ompany ania, ndhad notbrought ith

it discredit f foreign oans,or a collapse f the business f lending o foreigncountries; nd in one or two trades he increase f business as even greaterthan he general ncrease. Thus he quantity f our ron and steel exports osefrom ,042,000 ons n 1868 o 3,383,000 ons n 1872,or 66 per cent, n fouryears; while here was imultaneouslyrise of pricewhichmade he increase nvaluesmmense, otonly n these but in other articleswhere herewasno suchincrease f quantity. It is sometimes aid hat the burst f trade which ulminated n 1872-73was argely due to the extra demand or our manufacturescreated y the Franco-German ar. This war checkedmanufacturing nthecontinent or nearly twelvemonth,esidesausing wardemand or certain fourmanufactures; ut the comparison e havemade s of a year when he warwas ongoverwitha yearquite eforehewar,while he most onspicuousnstanceof increase n ourexports as n iron and teel,whichwasclearly n connectionwith ncreased ailway onstruction broad. Theexpansion f our oreign radewas husmanifestlyn connection ith he general xpansionf our oreign nvestment business, nd not the result of the accidental r temporary ausesw'hiehhavebeen ssigned.'1

This same subject of the effect of foreign loan investments on


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SO Hyde ClarkeOn the Debts of Sovereign nd

the national capital was included in an article of the "Economist,"of 22nd December, 1877:

" The facts whichwe have ndeavouredo laybefore ur readers, how hat,

taking he whole earings f thecase nto onsideration,ithanenormouspparentbalance f imports verexports gainst s,therehas existed evertheless,nanaverage f years, t leasta practical quilibrium.We say, at least a practicalequilibrium, ecauset is certain hat the balance f advantagerom oreign radeias hitherto een enerallyargely n our avour. This average pparent alanceagainstGreat Britain asbeenmaintained,omparativelypeaking, nsomethinglikea level,down bout o the endof 1873, r 1874. There s reason or hinkingthat at that date a much argerbalance, pparently gainst he country, ighthavebeenmet out of its resources,n the shape f income. Since hat date, heresources f this class, he sumswhich ther nations ave had to pay o us forinterest n money orrowed, ust, ora time at least,have reatly ncreased." Though ome f our recent nvestments s a natipn n foreign ecuritiesturned ut badly, thers urned ut well, nd he amount f interest hichw areentitled o draw, nddodraw, rom oreign ountries, ndoubtedly,otwithstandingalldrawbacks,ncreased reatly n the ast fewyears. But more ecently till,asis wellknown,n consequencef events, f which here s no need o allude ere,the confidencef the British nvestorn foreign ecurities asbeen argely haken.It is difficult o estimatehe exact mount, ut we are ed to the conclusion,hatasour exportwas n the years rom 871onwards ndoubtedlyargely timulatedby he amounts aised n this country s loans o foreign ations, o our mporttrade during he last three years maymost ikely have experienced similarstimulus, hrough hedrawing ack, n some onsiderable egree, f the advancesmade at the earlier eriod. It is quitepossible hat the amount f dividends

which his countrys entitled o draw rom other countries s interest n moneylent, plus heamount f capital rought ome,mayhavebeen ufficient o pay ora very arge proportion f the whole, r perhaps he whole,of the increasedimportations f the ast hree earsor so. Thevaluesof foreignbonds emittedwithin comparativelyecentperiod rom his country o other ountries, avebeen overy aige,that heymaywellhavebeen ufficientostop hegap for hepresent, hough considerableosshasbeyond oubt een experiencedn realisingmany f our oreign ecurities."

With regard to the further deductions of the " Economist," theycertainly require a limitation. The Writer ays :

" Onededuction, nd hat a very erious ne,mustbemade rom his. A verygreat oss,or what comes irtually o the same thing, a verygreat depreciationof property, as no question een xperiencedecently y many of those who,tempted y high rates f interest, aveplaced omeof their moneyn securitieswhich ave ither eased opaydividends, rhavebeen oldduring timeof greatdepreciation. o form an estimate f this lobs s impossible, ut taking ntoconsiderationhe enormousmount f foreign ecurities eld n this country, heaggregate epreciation ust ave ssumed orrespondingroportions. ofar backas April, 1876,* he depreciationn three classes loneof foreign ecurities,Turkish, eruvian, nd Egyptian, as estimated n the ' Economist/ s havingbeenduring he twelvemonths revious, o ess than 90millions, nd there asbeena verygreat rop n their value ince hat date. This oss wasundoubtedlydistributed ver he holdings f a vast number f persons, nd probably asaffectednlya portion f the ncome f most f them. It is impossibleosayhowmuch f it mayhaveextended o GreatBritain, ut it is quitepossiblehat theloss hiscountrymayhave xperiencedn this manner, nd n other ways,during

* See"Economist," f 1st Apiil,1876


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the ast hree ears,mayhavebeen ufficientoconsume,t least, s much s mayhavebeen aved n otherways, on an average uring ne year ut of the three.In support f this statement,t is onlyneedfulor hereader o bear n mind owgreat the drop n value of investments n many ndustrial ndertakings asrecently een.

" To put t plainly, t is quite ossiblehat he oss onforeignnvestments, ndin otherways, uring he ast three years,mayhaveamounted ofullyas largesumasthe savings f a country uring neyear."

The writer, it is true, includes with foreign loans other losses,but from the statements already made, it is questionable whetherforeign oans can in any way be regarded as having lost the savingsof the country, to any effectual extent, when compared with thosesavings, with the income of the country, or with its capital.

In any enumeration of these, whether treated by Mr. Robert

Giffen, or Mr. Ernest Seyd, the amount involved in foreign loanswill be found to be very small in proportion o the total. Adopting,as Mr. Ernest Seyd does, 6,248 millions as the value of the nationalwealth, the loss of capital by defaults must be under 1 per cent.,and the same appears from the figures of Captain Craigie (Journalof the Statistical Society, vol. xli, p. 35).

It is also to be observed^ hat the amount employed in foreignloans is to a great extent not to be regarded as a simple deadinvestment, but as a working or trading capital.

Mr. Giffen has also in his own way stated views the same asmy own, with regard to the nature of some of the illegitimate loanoperations, n his work on Stock Exchange securities:

" The uglier eatures f the collapse f foreign oans lso urnish vidence fthe characteristic ark f the crisis with which we have beendealing. Inaddition o the issue f loans,which nvolved he nvestment f capital na fixedform o an extravagant xtent, o that mmediateossand ruin couldnot butensue, here ad taken place n a fewyearsbefore 872 requentssuesof loansfor foreign ountries o called,whichwere nlydisguises o plunder he public.We refer o the loans orHonduras, araguay, an Domingo, ndCostaRica,

whichwere nvestigated ythe Foreign oans ommittee,nd oa numerous lassof which hese were perhaps he most lagrant pecimens. hesewere implyissues by knots of speculators, sually n the plea that they were or somepublicworkto hich small portion f the money aised as perhaps,n factdevotedbuteallywith the design, s carried ut by those oncerned,o paythemselvesarge ums n commissionsndotherwise,o longas the public ouldbe got to believe n such hings,by the payment f interest ut of the fundstheyhad hemselves dvanced.All his was erynatural. The peculiarity f thetime being he developmentf foreign ountries y loans, t wasonly naturalthat the illegitimate inancing f the time should lso consist f so-calledoans.As therehad beenbogus ompaniesn the daysof the company ania, o nowtherewere ogus oans."

VII.Of the extent of the defaults which have lately occurred t is

again to be observed that totals cannot be obtained. In some casesthe defaults have been temporary, and payment has been or will beresumed.


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The following is a table of the loans in default:

Loans n Default.

BoliviaCostaRicaEcuadorGreeceGuatemalaHondurasLiberiaMexicoParaguay

PeruSantoDomingoTurkeyUruguayVenezuelaVirginia and West "I

Virginia J

Principal.

1,654,0003,304,0001,824,0002,400,000

542,2005,398,570

100,00027,905,8001,505,400

32,953,000714,300140,000,000

3,164,8006,616,8005,521,000

Interest.

300,000700,000183,000

all80,000

all28,000

388,000350,000

2,800,000236,00022,000,000

380,0002,817,8625,521,000

10,

An arrangement for Venezuela is in operation. The default ofVirginia State is partial, but affecting more or less the various classesof

bondholders,and most

seriously injuringthe credit of the State.

West Virginia has made no settlement for her apportionment of thedebts, but in both these cases something will be received. InBolivia and Uruguay there is a prospect of composition, and so alsoin Ecuador. The cases of Costa Rica, Mexico, Liberia, Paraguay,and Santo Domingo are not desperate. Some composition may beexpected eventually from Peru and Turkey. Guatemala s makingoccasional remittances.

The hopeless cases are those of Greece and Honduras, and it is

useless to keep an account of unpaid coupons which will never beredeemed.The heavy amounts of Turkish, Peruvian, and Mexican stocks

are shared in by French, Dutch, and other holders, as also Ecuadorand Venezuela. The English amount at stake does not exceed6o,ooo,oooZ., ubject to realisation. Insignificant as the amount atstake is relatively, I must say on the general question that I cannot believe it possible that we have lost 500,000,000^. n the lastfive years by the balance of trade against us, or that we are now

losing ioo,ooo,oco. a-year. The more the subject of the differencebetween exports and imports is examined, the more does it comeout, after allowing for yearly variations, that there is a generaltrade charge of from 10 to 15 per cent, (freight, &c), which is aconstant in the operation.


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VIII.

One of the practical points bearing on the consideration offoreign loans which it is here proposed o bring forward, s connectedwith the means of enforcement against foreign States in case ofdefault.

The conditions of international aw have always been affected bythe existence to a greater or less degree of a number of sovereignand semi-sovereign States. Such we find in the earliest stage oftheir relations n the numerous Greek States and republics. Duringthe middle ages the feudal States of France, and the numerousecclesiastical and civil dependencies and free cities of the HolyRoman Empire, as well as the duchies and republics of Italy, playeda like part. It was on the observation of these relations that doctrines of public law were formed, which were brought into systemby the writers of the sixteenth and seventeenth century, and whichin the last century were taught in the text-books of Grotius andPuffendorff. In England hese relations were less studied, on accountof the union of our kingdoms leading to greater internal simplicit}''.

The establishment of the American federation under the principle that each State was sovereign, prepared he way for a new seriesof historical incidents, and for the foundation of a school of international aw producing English text-books, which not only influencedstudents of this country, but also the principles of internationallaw throughout the world.

The French Revolution in its consequences again altered thefrontiers of the European States. The small sovereignties were inevery direction swept away, the Seven United Provinces of Hollanddisappeared, and the abolition of the Holy Roman Empire preservedonly a few of the larger principalities of Germany. Thus what maybe called the European chool of international aw had only to regardthe operations of a limited number of States, and these greatlyinfluenced by the proceedings of the Holy Alliance or of the fivegreat powers. In Europe everything has long tended to the suppression of small sovereignties and nationalities, and to the creationof great powers, except so far as this has been interfered with bythe promotion of revolution in Turkey from without.

In America, however, the wars of independence had created anumber of Spanish-American epublics, which under the favouringassistance of England and the United States were received as sovereign powers, without the smallest regard to their origin or constitution. A country with a population of Indian blood, of which alarge portion was in a condition of serfdom, and has remained so,was, under the holy name of liberty, constituted a republic, andallowed to regard itself as on a par with the highest communities

D

7/31/2019 1878 on the Debts of Sovereign and Quasi So

1878 on the Debts of Sovereign and Quasi Sovereign States

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Transcript of 1878 on the Debts of Sovereign and Quasi Sovereign States