This would be especially tempting in view of the fact that, after the war, there will be great diffi culty in making both ends meet; but, in the long run, nothing could be more fatal, as is shown by the experience of those countries which had not sufficient courage or strength of character to repay what they had borrowed from the banks. This danger was apparent to M. Thiers after the war of 1870-71. The Btate's debt to the Bank of France then amounted, in round figures, to £60,000,000, bear. ing interest at 3 per cent., while the State could not borrow at less than 6 per cent. It was decided to repay £8,000,000 a year, and this sum was included in the ordinary budget, with the result that in seven or eight years the debt was wiped out and the forced legal tender of bank notes was removed. In exchange the Bank, being satisfied that there would be's return as soon possible to normal conditions, reduced its rate of interest on advances to 1 per cent.
When making an arrangement with the Bank of France in September, the present Governmtnt could not' bind itself to say how the Bank's advances were to be repaid, because it was impossible to foretell what would be the financial position of the country after the war. All it could say was that the advances should be repaid as soon as possible. The Government thus followed the same system as in 1871; but, to give Breater force to this engagement, the Government thought it wise to open a sinking fund by undertaking, during the year following the close of hostilities, to pay the Bank 3 per cant. interest instead of 1 per cent. This extra interest is not to be used for increasing the shareholders' dividends but is to go to a reserve which will form nucleus for the repayment of the debt. This will not only be a protection for the Bank but will also be to the advantage of the country because it will compel the latter to make sscrificea which it might otherwise be weak enough to postpone.
Text read from the printed page and cleaned; old type leaves the occasional error.