Mr. Morris to Mr. Hunter

No. 116.]

Sir: I have the honor to transmit a letter of condolence on the part of the Shah of Persia and one from the Greek minister of foreign affairs to the Greek consul at New York. The letter has been communicated to me by the minister of Greece to the Porte, by order of his government, with the request that I should forward it to my government.

The object of the visit of General Marquez, the special envoy of the so-called emperor Maximilian, is limited to the purpose designated in my last despatch. The grand vizier declares to be without foundation the report that the Porte will give him its sanction of the incorporation of the Egyptian blacks into the imperial army, and of a further contingent of black troops from Egypt. He said, in reply to my inquiries on the subject, that the Porte would have nothing to do with such an affair. I learn, however, that General Marquez expects to receive at Vienna four battalions and a regiment for the service of Maximilian. The soldiers enlisted in Europe for this purpose are needy adventurers, whom necessity, and not sympathy with the imperial cause, has induced to accept the proffers of the agents of Maximilian. They are not such a class of men as can be relied on to support a government in the hour of adversity. The desire to get to America also is so great that men will embrace any pretext to compass their wishes in this respect. Never was there a time when the hearts of the million masses of Europe throbbed so warmly to the United States as now, and never was there less sympathy with any movements directed against the spread of our political principles on the American continent.

* * * * * * *

I have the honor to be, very respectfully, your obedient servant,


Hon. William Hunter, Acting Secretary of State.

(For enclosures see Appendix, separate volume.)

P. S.—I beg to enclose a brief statement of the last financial scheme of the Turkish government.

[Page 295]

The conversion of the home debt.

The following is an abstract of the statement issued in London by the contractors for this operation:

“The great object of the scheme may be described as that of definitely transporting Turkish finance from the region of, Oriental into that of European finance. Oriental governments invariably live from hand to mouth. They contract debts without forethought, are irregular in their payments, and as a consequence pay, in a long run, usurious rates in order to cover the risks. European governments, on the other hand, make the act of borrowing a deliberate and public act, surrounded by as many safeguards to the lender as possible, and they invest their public stocks with as many attributes of security and convenience to the holder as possible, so as to get money at the lowest rate which the intrinsic state of their credit admits of. Foremost among these attributes is the existence of one large, uniform stock, or consols, instead of various petty stocks of different denominations. Nor is it less important for countries where domestic capital is scarce and a large part of their national debt is raised abroad to make it payable in specie, at a fixed exchange, at all the principal monetary centres of Europe. A consolidated debt of this sort, payable at London, Paris, Amsterdam, and Frankfort, as well as at home, inscribed in a grand livre, and charged on the general revenues of the empire, with due provisions against frittering these means away by hypothecations or raising further loans, except openly and under legislative authority, may be said to afford the maximum of security and convenience possible, and, consequently, to enable the state which adopts it to raise money at the minimum rate consistent with its intrinsic resources and credit. There is as much difference between this and the irregular expedients by which Oriental governments are accustomed to raise money as between the mortgage which a nobleman may give an assurance company on his estate, and the bills which the same nobleman, in the thoughtless days of his youth, may have given to some West End money-lender to meet a loss on the turf. The former is in some respects less convenient, for it must be paid punctually each quarter day in actual cash, while the latter may probably be staved off for a term or two by signing a fresh piece of stamped paper; but then he pays the difference between 4 and 40 per cent, for the accommodation, and, what is even more important, he executes the mortgage deed only after due reflection and on some grave occasion, while, if once accustomed to it, he is apt to scatter about his signature to the looser sort of paper to meet every passing whim or inconvenience. These general principles apply peculiarly to the case of Turkey. The cause of her pecuniary embarrassments has been, not the deficiency of her resources to meet her necessary expenses, but the inveterate habit of borrowing from local money-lenders at Constantinople at 15, 20, and even 30 and 40 per cent., to meet arrears in the collection of taxes and irregular expenses incurred without any publicity or sanction.

“Again: punctuality in the payment of debts necessitates punctuality in the collection of revenue. Now, the want of this punctuality has been the want of Turkish finance. The revenue is ample to meet the expenditure, but practically from 20 to 30 percent, of each year’s collection is allowed to fall into arrear, and a considerable part of this arrear is never recovered. There is no reason why the whole revenue should not be punctually collected, as in India, where the arrears are inconsiderable. The necessity of paying half-yearly dividends punctually will soon bring about the administrative reforms which are alone necessary to make the collection of the very light taxation of Turkey prompt and regular. As regards the payment of a large part of her debt abroad, Turkey is also in an exceptionably favorable position. Turkey is like India, a country which habitually exports more than it imports, and this favorable balance of trade is certain to increase as roads and railways develop the resources of the interior. In the case of Turkey, therefore, as in India, a large amount of payment may be made abroad by the State without preventing the influx of a moderate amount of specie. If these payments ceased, the influx of specie would soon become excessive and raise prices to a point that would check exports.”

“In addition to these general considerations, it is pointed out that the special advantages to the Turkish government of the present consolidation will be—

“1. That it enables them to raise a sum of £2,000,000 cash, without any increase of present burden on the budget, the saving by the reduction of the sinking fund from 2 to 1 per cent on the capital covered being enough to pay 5 per cent, interest and J per cent, sinking fund on £4,000,000 of new stock.

“2. The new sinking fund being applied in the purchase of stock in the market at 55 or 60, instead of in drawings at 100, will go nearly twice as far, and, in addition to paying off the capital of the debt in 37 years, will accumulate a reserve fund equal to that capital in the same period.

“3. The existence of this reserve fund, and of a reserve of authorized inscription in the grand livre, will always enable the treasury to obtain such temporary advances as may be required to equalize the receipts and payments of different periods of the year, or to meet grave emergencies at a moderate rate of interest.

“As regards the present holders of the internal debt, the advantages are equally obvious. The holder of a six per cent, consolidé of 100 medjidies d’or, or £90 sterling, gets £110 sterling [Page 296] of new 5 per cent. consols, yielding a slightly better interest, with £20 more capital and all the vast improvements of security afforded by inscription in the grand livre and payment of interest in gold, at a fixed exchange, in all the principal places of Europe. For this great advantage he gives up nothing but the difference between the present two per cent, amortissement and the one per cent, new amortissement applied in purchasing the stock. As a question of figures, it is quite clear he gains greatly. The new consols are in all respects on a par, as regards security, with the existing six per cent, external loans, except as regards the special hypothecations of certain branches of revenue in favor of the latter, which are fast running off by the action of their sinking funds, and to which, with the exception of the special charge on the Egyptian tribute for the loan of 1854, no great value could be attached in the extreme and improbable case of Turkey becoming insolvent. But if a 6 per cent, stock with a 2 per cent, amortissement be worth 70, (and it is now quoted higher,) a 5 per cent, stock is worth 53 without any allowance for the 1 percent, amortisation, which, being applied in purchase, tends to raise the average market price of the stock. And if £ 100 of the new consols be worth £53, a consolidé, which is exchanged for £110, is worth £58. But the market value of the same consolidé was not above £48 until the recent issue on the prospect of the conversion, and if the scheme for conversion had been defeated the price would in all probability have gone back to that figure, or lower. For the other classes of internal debt the advantage of conversion is equally obvious. Lastly, as regards the holders of the external debts, their position is improved by the general improvement of Turkish finance. Whatever improves the credit and adds to the borrowing power of a state, improves the security of previous debts. The holders retain all their special securities, whatever they may be worth, unaffected, and the only suspicion of an injury to them is that the superior attractions of the new stock may lead to competition with the old stocks in foreign markets. But this is by no means certain, as it is generally found that when a domestic stock rises in value the native holders buy rather than sell. This was strikingly the case in India with regard to the rupee paper, and there is every reason to believe that as Turkish stock rises and confidence is created, a larger, rather than a smaller, proportion of the whole debt will be held in Turkey. At any rate, the holders of the old external debts will always have the opportunity of converting, at a fair rate, if they desire it, into the new stock, as the policy of the Turkish government must always be anticipated by voluntary conversions, the period of the complete unification of the whole national debt, and discharge all special hypothecations. Supposing all debts converted into the new stock, the whole existing national debt of Turkey would only be about £60,000,000. Such a debt will be by far the smallest debt of any country of Europe in proportion to its population, revenue, and resources; and with a moderately good system of taxation and financial administration, which are now in the way of being carried out, the Turkish treasury would soon be in a state of prosperity.

“The following extract from a statistical return just published by the Foreign Office affords the best proof how light are the debt and taxation of Turkey compared not only with those of wealthy nations, such as England and France, but with the poorer countries of Europe, such as Russia and Austria, and even with the states of South America:


Annual Revenue. Public debt.
£ s. d. £ s d.
England 2 8 2 28 2 5
France 2 0 4 14 0 4
Russia 0 12 7 3 11 1
Austria 0 16 8 6 12 4
Italy 1 4 9 5 13 3
Spain 1 6 4 9 8 5
Portugal 0 17 1 8 7 1
Brazil 0 15 8 2 19 8
Chili 0 17 10 1 16 4
Peru 1 13 11 2 14 10
Turkey 0 7 9 13 1 1