the prices of securities
that they buy are only inviting disaster by the greed that wants the
unattainable and the gullibility that deludes them into thinking they
can have it.

To return to our Ruritanian loan, which we left being underwritten. The
prospectus duly comes out and is advertised in the papers and sown
broadcast over the country through the post. It offers L1,500,000 (part
of L3,000,000 of which half is reserved for issue in Paris), 4-1/2 per
cent. bonds of the Kingdom of Ruritania, with interest payable on April
1st and October 1st, redeemable by a cumulative Sinking Fund of 1 per
cent., operating by annual drawings at par, the price of issue being 97,
payable as to 5 per cent. on application, 15 per cent. on allotment and
the balance in instalments extending over four months. Coupons and drawn
bonds are payable in sterling at the countinghouse of the issuing firm.
The extent of the other information given varies considerably. Some
firms rely so far on their own prestige and the credit of those on whose
account they offer loans, that they state little more than the bare
terms of the issue as given above. Others deign to give details
concerning the financial position of the borrowing Government, such as
its revenue and expenditure for a term of years, the amount of its
outstanding debt, and of its assets if any. If the credit of the
Kingdom of Ruritania is good, such a loan as here described would be,
or would have been before the war, an attractive issue, since the
investor would get a good rate of interest for his money, and would be
certain of getting par or L100, some day, for each bond for which he now
pays L97. This is ensured by the action of the Sinking Fund of 1 per
cent. cumulative, which works as follows. Each year, as long as the loan
is outstanding the Kingdom of Ruritania will have to put L165,000 in the
hands of the issuing houses, to be applied to interest and Sinking Fund.
In the first year interest at 4-1/2 per cent. will take L135,000 and
Sinking Fund (1 per cent. of L3,000,000) L30,000; this L30,000 will be
applied to the redemption of bonds to that value, which are drawn by
lot; so that next year the interest charge will be less and the amount
available for Sinking Fund will be greater; and each year the
comfortable effect of this process continues, until at last the whole
loan is redeemed and every investor will have got his money back and
something over. The effect of this obligation