Page:A biographical dictionary of eminent Scotsmen, vol 4.djvu/233

sure which was modified in 1792, by the assignment of one per cent annually, on the nominal capital of each loan contracted during the war, as a sinking fund appropriated for the redemption of the particular loan to which it was attached. It underwent several other modifications, particularly in 1802 and 1807. The great prophet and propounder of this system, the celebrated Dr Price, unfolded his views on the subject, in his treatise "Of Reversionary Annuities," published in 1771. It is a general opinion, that an application to studies strictly numerical, will abstract the mind from the prejudice and enthusiasm of theory. Dr Price has proved the fallacy of such a principle, by supporting his tables of calculations, with all the virulence and impatience of a vindicator of the authenticity of Ossian's Poems, or of the honour of queen Mary. Dr Price has given as a glowing example of his theory, the often repeated instance of the state of a penny set aside and allowed to accumulate from the time of Christ:—it allowed to remain at compound interest, it will accumulate to, we forget exactly how many million globes of gold, each the size of our own earth—if it accumulate at simple interest, the golden vision shrinks to the compass of a few shillings and if not put out at interest at all, it will continue throughout all ages the pitiful penny it was at the commencement. The application of the principle to an easy and cheap method of liquidating the national debt, was so obvious to Dr Price, that he treated the comparative coldness with which his advice was received, as a man who considered that his neighbours are deficient in comprehending the first rules of arithmetic; and it certainly is a singular instance of the indolence of the national mind, and the readiness with which government grasped at any illusive theory, which showed a healing alternative to the extravagance of its measures, that no one appeared to propose the converse of the simile, and to remind the visionary financier, that in applying it to national borrowing, the borrower, by allowing one of the pennies he has borrowed to accumulate in his favour at compound interest, is in just the same situation as it he had deducted the penny from the sum he borrowed, and thus prevented the penny and its compound interest from accumulating against him. The practical results of Dr Price's theories were, the proposal of a plan, by which a nation might borrow at simple interest, and accumulate at compound interest a fund for its repayment : boldly pushing his theory to its extremities, and maintaining that it is better to borrow at, high than at low interest, because the debt will be more speedily repaid; and as a corollary, that a sinking fund during war is more efficient than at any other time, and that to terminate it then, is "the madness of giving it a mortal blow." The supposition maintained by Dr Hamilton, in opposition to these golden visions of eternal borrowing for the purpose of increasing national riches, did not require the aid of much rhetoric for its support it is, that if a person borrows money, and assigns a part of it to accumulate at compound interest for the repayment of the whole, he is just in the same situation as if he had deducted that part from his loan and hence the general scope of his argument goes to prove the utter uselessness of a borrowed sinking fund, and the fallacy of continuing its operation during war, or when the expenditure of the nation overbalances the income. The absurdity of setting aside a portion of- the sum borrowed for this purpose, (and generally borrowed at more disadvantageous terms as the loan is to any degree increased,) was partially prevented by a suggestion of Mr Fox; but the sinking fund was strictly a borrowed one, in as far as money was laid aside for it, while the nation was obliged to borrow for the support of its expenditure. The evil of the system is found by Dr Hamilton to consist, not only in the fallacy it imposes on the public, but in its positive loss of resources. The loans are raised at a rate more disadvantageous to the borrower than that at which the creditor afterwards