Conversion

Pleased Treasury officials rubbed their hands over long tables of figures last week, then called in the Press for an announcement. The first, most important step was over in the Government's spectacular campaign to convert Britain's 5% War Loan Bonds (largest single block of the national debt) to new 3 1/2% bonds Out of a total of -L-2,086,000,000 outstanding, -L-1,500,000,000, or something over 70%, has been voluntarily converted. Over 75% of the individual bondholders, 2,036,700 out of 2,600,000, have come forward with applications. Only 6 1/2% of them took advantage of their right of Dec. 1 redemption (in paper pounds) instead of conversion. Those who remain silent until Oct. i automatically have their interest cut.

Beamed Ramsay MacDonald: "Everyone must be proud of this magnificent response."

Object of this, the largest conversion campaign in British history, is to keep taxes down and the budget balanced by saving the British Treasury $100,000,000 a year in interest charges (TIME, July n). To get Britons to give up their 5% bonds for 3 1/2% the Government undertook a tremendous financial operation. Short term money rates were reduced to startlingly low levels. Other outstanding 3 1/2% bonds sold at 85 in early May while the new 3 1/2% loan sells at 97, represents an immediate loss of 3% for all who converted.

Only real bait offered was a cash bonus of -L-1 for every -L-100 worth of bonds converted prior to Aug. 1. Obviously to convert was no business transaction. It was a great act of united national patriotism. To put it over all the stops of Wartime propaganda were pulled out. Posters went up on the hoardings, there were placards in Trafalgar Square. Orators spellbound theatre audiences in the intermissions. Newspapers printed honor rolls of firms who had converted all their War Loan Bonds, heaped honors on superpatriots who refused to accept their -L-1 cash bonuses. And it worked.

Walter Elliot, Financial Secretary to the Treasury, confidently announced that by Sept. 30, last day for voluntary conversion, over 90% of the loan will have been turned in.

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