THE announcement made in the Second Edition of the Times of October 8th, that Turkey had resolved to pay for five years to come only half her debt charges in cash, is the most considerable financial event that has happened for some time. It dissolved in one moment the whole fabric of Turkish credit that financial adventurers of all classes have laboriously built up and maintained for the past twenty years; and it put an end probably for ever to the mania that has possessed the English public since the days when Palmerston persuaded it that the great mission of England was to keep the Turk on his European throne at any cost. Since that time until now, many people in this country have blindly pinned their faith to the regeneration of Turkey. Greed no doubt has done much to blind people, but that greed did not do everything is proved by the modes adopted by financial agents to lure the investor to give his money to Turkey. For twenty years past every loan issued has been to regenerate the Empire; and all murmurs hinting at its growing poverty have been met by the threadbare story of the "vast natural resources of the country" that this new influx of wealth was to bring out. These resources were the stock answer thrown at the heads of all detractors of Turkish credit. What if the last loan was ill-spent on a new palace, a new ship, or a new troupe of dancing women and slaves for the harem? This loan shall not be so spent-guarantees have been taken that it shall not; and the "vast natural resources" will soon make the land blossom into prosperity. I suppose the people who repeated these tales from day to day and year to year came to believe them. Their selfinterest blinded them to all the facts, and probably to the simplest deductions

of them too harshly; but their faith has had disastrous results for not a few in this country, and in France, Italy, and Holland; while for Turkey the greatest curse of all, one far exceeding in its baneful effects the extravagant folly and immorality of the Sultan's court, has been the "belief" of these same financiers. The worst that could have befallen investors has probably come upon them now; but what mischief the money-lending harpies have done to Turkey, and what consequences the Turks' trust in their guidance may bring, cannot yet be estimated.

Much has been said in the newspapers about the probable scope and effect of the Turkish decree upon those who hold its bonds. As every one knows, all the bonds issued by the Turks have had some supposed special guarantee, except the so-called General Debt of the Empire, the common receptacle, as it were, into which the lumps of floating dead weight were from time to time thrown, for which no special hypothecation could be obtained. Under the show of "special hypothecations," we have thus three different loans secured on the tribute payable by Egypt-those of 1854, 1855, and 1871. A loan issued in 1858 is " secured" on the Constantinople customs; one in 1862 on tobacco and other revenues; one in 1865 on the sheeptax, Tokah mines, &c., vulgarly known as "muttons," or the mutton loan ;" and one in 1869 on the tithes, &c. Others there are with "special security" of one sort or other, the hypothecations being always given as of much greater amount than the loan charges. The only debts having no security of any particular kind were the Treasury Bonds, the General Debt aforesaid, and the floating obligations. Now the Turkish decree sweeps all these into one heap, with

loan being guaranteed by France and England, whom Turkey has not yet made up its mind to leave in the lurch; and the outcry is that by thus doing Turkey has perpetrated a violent injustice. Unfortunate bondholders of this or that loan keep writing to the papers to point out how good their security is and how special, and to say that the Turk ought to be compelled to stand by his agreement. The general idea appears to be that if reduction in the debt charge is inevitable, it ought to come with discrimination, and that the general and floating debts ought to be left out in the cold, so long as the "secured" loans are unsatisfied. That notion is quite just, and is one that bondholders are entitled to press home on the Turkish Government, but there are unfortunately several cogent reasons why one may doubt gravely whether the least heed will be paid to their protest.

In the first place it appears evident that the Turk did not take this step with that extreme hastiness which has been assumed, just because he took such good care not to tell the Bank, or the money-lenders, who have usually guided him, what he was going to do. The course of market speculation proves that the stroke was resolved upon days before it was announced, and that the Sultan not improbably, and his underlings certainly, made a considerable sum of money out of it. The thing was, therefore, not done on the spur of the moment, nor in that ignorance of its results which bondholders would fain persuade themselves the Turk displayed. Secondly, the position of the Sultan as a large holder of his own debt will prevent his making any concession. He holds a sum variously estimated at from 5,000,000l. to 7,000,000l. of the 5 per cent General Debt bonds, and that is also the stock held by his favourites and by the Turkish people generally. This, in fact, may be regarded as the internal debt, while the "secured" bonds are the external. It might be as much as his rickety throne is worth, therefore, were he to say that the debt charge on these 5 per

the foreign creditor is satisfied. He could not do it for his safety's sake, and he will not do it for the sake of his own pocket. Finally, the self-interest of those who have led him to this end, must, as long as he is likely to listen to them, prevent the sincere adoption of any just policy towards the foreign bondholder. These people are the mainsprings of all Turkish borrowing and the supports of the floating debt, and if the General Debt were left out in the cold so would their advances be. When the Sultan wanted, say 3,000,000l. for the service of a loan, or for any deficit, they would lend it him at any percentage obtainable from fifteen to thirty, and as their money was never forthcoming when the day of payment came, the usual plan has been to renew the whole principal and interest at a similar or higher rate. After a little time these financiers would have about as much of this kind of floating debt as they could carry, however much the number of participants might be augmented with each renewal, and then matters would be put in train for "funding" a portion of it as a new loan. Out of 10,000,000l. or 15,000,000, to be thus funded the Sultan would probably have received about half, more or less, according to the length of time that this snowball of floating debt had been kept rolling, the rest going as discount on the issue price of bonds, compound interest, commission, &c.; and when the public took the burden off these financial agents' shoulders they thus made a most handsome profit. Constantinople has in this fashion for nigh twenty years been the El Dorado of usurers of all nations, corporate and individual. But latterly matters have not gone quite so smoothly with them. One or two of the last baits held out (of which we shall presently give a specimen) have not taken well; the floating debt has been growing and growing in a very ugly fashion, and no kind public has come in to lift it in the old blind, believing way. Probably a fourth of the 1873 6 per cent loan for 28,000,000l. will fully represent all of it

concoctors' hands by the public. Consequently all sorts of straits have come upon these people. They have had to lend money on the security of the unissued stock of this loan, and the floating debt has kept mounting and mounting with no apparent chance of its being taken off their shoulders, while the security they have had for obtaining repayment from the Sultan has become more and more shadowy. I trust sincerely their present load will never be taken off, and that those who have made most by working Turkey as a bait for drawing their savings from the public will now suffer most heavily; but it must be obvious that this state of affairs will make the holders of the present floating debt of 10,000,000l. or 20,000,000l.-nobody knows what it is more than that it must be prodigious-fight strenuously against any policy that might deprive them of some share in whatever cash is to be had. For these three reasons, amongst others, it is more than doubtful that all attempts to extort a new arrangement will be vain. Even supposing concessions are granted upon paper they will be practically ignored, as the manner of the Turkish Government in the past has ever been. The Sultan is thus in a dilemma out of which he cannot get. If he has any money he must share it first amongst his own subjects, next amongst the financiers who have lived on him hitherto, and what is left will go to the holders of the "specially secured" loans, whose position is thus reversed by the Turk's self-interest and subjection to the

usurers.

That being so, a grave question at once presents itself. If the bondholder can have no recourse against Turkey and short of "foreclosure" on the mortgage I do not see what recourse they can have,-is there none against those who stood sponsor for Turkey? The position which now one party, now another has assumed towards the loans issued by her has been one of the closest responsibilities and sometimes even identification. Our own Government stands among the rest in a questionable

ever raised-the loan of 1854. True we did not guarantee that loan, as in conjunction with France we did that of the following year, but our love for Turkey at that time was great, and as a token of that love we permitted the eminent city firm who issued the loan in London to use this language regarding it :-"The undersigned have the satisfaction to acquaint the public that they are authorized by the Earl of Clarendon, Her Majesty's principal Secretary of State for Foreign Affairs, to state that this loan is negotiated with the knowledge of the English Government; that Her Majesty's Government is satisfied that the loan and the appropriation of the above-mentioned 30,000,000 piastres (£282,000) per annum of the Egyptian tribute are duly authorized by His Majesty the Sultan; and further, that the representatives of the Sublime Porte at Paris and London are empowered in virtue of Imperial Firmans to ratify the contract for the loan in the name of His Majesty the Sultan ; and Lord Clarendon relies with confidence upon the Turkish Government fulfilling with good faith the engagements they have entered into." This does not of course amount to a guarantee by this country in any legal sense, but it is morally something of the kind; and people with some show of justice might turn round upon our Government and say-'It was by your counsel that we lent our money to this loan, paying £80 per cent for our bonds. You ought to indemnify us.' Something of that kind will no doubt be said; but there are worse offenders than Lord Clarendon in this respect, grave though his mistake was. Much has been heard of the curious documents by means of which countries like Houduras and Paraguay managed to get money from the English pubiic, or rather by means of which loan-mongers got the money; but statements have I think been issued regarding Turkey, as bad, all the facts considered, as any of these. In this respect the Imperial Ottoman Bank has been the

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unsatisfactory "friend" that the Sultan ever had. Knowing the corrupt character of the Turkish Government, as its Constantinople officials must have done, it is strange to see how greed of gain, and no doubt also some remains of the old enthusiasm about Turkey's great resources, have blinded them to the true state of affairs. In the light of what has now happened, many of the announcements issued under the sanction of the Bank read as if they could hardly have been made in good faith. If they were, then two things were greater at Constantinople than I have hitherto been inclined to suppose-the cunning of the Turks, and the credulity of the Greek, French, Armenian, and English financiers, who guided the policy of the Bank. I would not rashly assert that there was not a lingering belief that one more chance' might yet enable the Turk to turn the corner, and allow prosperity to dawn upon Turkey. Nor do I deny that as the English element prevailed in the counsels of the Turk, some efforts were made to stem the torrent of corruption, and to secure the reform of Turkish finance. The Bank last year strove hard and earnestly to set bounds to Turkish extravagance and could not. But it is precisely this continued failure that causes us to doubt whether sensible men ought not to have held their hands long ago; and but for the boundless credulity with which greed of gain can inflate the mind, I think sober-minded men in Constantinople would have seen and turned away from the rottenness that cried out for speedy burial long ago. Looking at the question from a bondholder's point of view, however, and waiving all question of good or bad faith, it is impossible, in the face of what has happened now, and of what sensible people have foreseen for years past, to avoid the conviction that something more than a nominal responsibility attaches to declarations like the following. The prospectus of the 5 per cent loan issued last year under the auspices of the Imperial Ottoman Bank, says: "The loan has

the Sultan in accordance with a convention between the Imperial Ottoman Government and the Bank, and in pursuance of the law for the reform of the financial administration of the Empire, promulgated in July last, with a view to regulate and adjust the receipts and expenditure of the Empire, and to simplify the present system of financial administration, and more especially to insure the meeting of the financial obligations of the Government as they mature. To effect these objects, it is provided by the convention that the Imperial Ottoman Bank shall receive the whole of the revenues of the Empire from the collectors, who are to be put into direct communication with the Bank. The Bank is authorized to reserve out of the revenues the funds required for the service of the public debt, and to make the disbursements authorized by a Commission of the Budget, on which the Bank is to be represented ex officio. The law enacts that no branch of the administration shall exceed in its expenditure the amount appropriated for it in the budget authorized by that Commission, and provides that, if from exceptional causes any additional expenditure is indispensable, the department requiring it must report the amount and object to the Government, which must submit the report to the Budget Commission for approval, and provision be made for meeting such additional expenditure."

This is a most satisfactory statement, but unfortunately the elaborate promise here made for the security of Turkish bondholders never went further than the paper on which it was drawn. No sooner was the money raised, than the whole affair was revealed to be merely one of the usual expedients by which the Turks have raised money every other year since 1854. If we might speak vulgarly of such august persons as the Sultan and his officials, it was only a dodge to get money by. The Ottoman Bank was never allowed to collect the revenues in any real sense; and to those who know anything of the vile

must have seemed madness for the Bank ever to expect to do it. It only got what moneys the spending departments chose to let it have. It could do nothing towards effecting reform in anything. Yet on the faith that that compact represented a fact, some people lent their money once more to Turkey, and it is surely a fair question whether they could not now have recourse against the instrument by which they were so manifestly misled. It would not be surprising to find the question argued in a court of law; and whether the bondholders got a verdict or not, it is a question worth trying. The true status of loan contractors, and the extent of their responsibility, are things that need defining above every other business question almost, and this would be a good case to try it on, for the Ottoman Bank indubitably led the public to put faith in its character of regenerator of Turkey more than in the Turk himself.

But there are two other points of greater importance than this one connected with the Turkish bankruptcy, and to these we must now turn. The first is the effect which this step of the Turk is likely to produce on his financial position, and the second its political results. As to the first, there cannot be much hesitation in forming an opinion. The payment of the charges on the Turkish debt has for a number of years been made almost entirely by raising money in the method already described. This is proved by the rapidity with which the debt itself has grown, and therefore statements as to growth of revenues and all matters of that kind are entirely beside the mark. Be the revenues of Turkey 20,000,000l. or 10,000,000. the Turkish debt burdens have not been

borne by them, except to a very limited extent. For my part, I may say in passing that I disbelieve the big sounding stories about the growth of the Turkish revenue, just as I disbelieve the talk about "developing the resources of the country." All trustworthy testi

year Turkey has been growing poorer; what capital was in the country has been drained out of it, and none other has come in beyond the money lavished in the capital. Provinces have been devastated by famine, the people ground by the tax-farmer, robbed by the hurrying governors, who knew that but few days were theirs wherein to fill their pockets. The few manufactures that the empire possessed have almost died out, roads and public works of all kinds have fallen into decay, and amid all these signs of wreck, depopulation, poverty, and general ruin, is it not a marvellous impudence that can bid us turn and look at the growing revenues of Turkey as proof that it is richer than it was? What boast more hollow than that which is based on the

"growing revenues of the country? Here growing revenues mean growing depopulation and misery. Turkey has not been growing richer, but poorer, and her debt is a burden too huge to be borne by her actual resources in any shape. It therefore follows that if Turkey can raise no more loans, the whole of the debt payments are seriously jeopardized. I do not believe, in fact, that the measure announced by the Sultan is nearly thorough enough. He might, if freed from the canker of insurrection, struggle on for a year or two with the weight of a third or a fourth part of the debt; but he cannot carry a half unless he gives up his civil list altogether. The financiers who have hitherto propped him up cannot but know this very well. They are fully aware that if they cannot help him there will be no money forthcoming in January for the dividends then due, and they are, therefore, in the desperate dilemma we have described. If the Sultan now stops payment altogether, they themselves will be caught, because they have been going on making advance after advance in the hope that a new loan might by and by be funded. The stock pawned with them as security will sink to zero ; and it may soon be bankruptcy for not a few who have lived for years in over