While it is often necessary, in order to obtain the required funds on the best terms, to offer many different forms ofpublic securities, yet in a time of absence of pressure it may become desirable to simplify these forms and to consolidate the debt.

1 See Johnson, Report on the Belief of the States, 27th Con., 3d Sess., House, No. 296 ; a perfect mine of information on the history of public debts in the United States up to 1842.

This involves the calling in of the outstanding paper and its conversion into another form. Conversion is generally undertaken when a fall in the rate of interest offers the State an opportunity to gain by the process. The reduction of the rate of interest is possible whenever the State enjoys the privilege of repayment. It can then offer the creditor the choice of payment (for which it could obtain the money by the sale of new bonds at the new rate of interest) or of new securities at the lower rate. This mode of conversion or reduction of interest is, of course, perfectly legitimate. The reduction of the rate arbitrarily without the consent of the creditors is as much repudiation as the refusal to pay altogether. It is by numerous conversions and consolidations that the rate of interest on the bulk of the debt of Great Britain has been reduced as low as 2.75 per cent.