"Please draft Notes on these lines, and submit them to me, and make all the necessary arrangements without delay.

(Signed) WILHELM I.R.” We should be sorry to guarantee the genuineness of this amazing document; on the other hand, it may well be true that, if only for purposes of subsequent publication, the original Peace Note was hatched in this way. Certainly no one can say that it was unnecessary for the Kaiser to say that he has a conscience and a heart. No one would ever have thought it.

III. THE GREAT WAR LOAN.

The War Loan to which subscriptions are now invited is only the third since the war began 2 years ago. The second was subscribed in the middle of 1915, but it must not be imagined for a moment that the money then lent to the State has been sufficient until now for the needs of the State. A long-term loan (such as that now before the public) is only one of the many ways in which the Government can borrow, and in the last eighteen months the Chancellor of the Exchequer has got the money that has had to be borrowed by various forms of short-term securities :

5% Exchequer Bonds.

6% Exchequer Bonds.

War Savings Certificates.

War Expenditure Certificates.
Treasury Bills.

The amount raised in this way has been nearer two thousand millions than one.

For some time past it has been known that at a moment considered favourable the Government would float a long-term War Loan, and Mr. Bonar Law, the Chancellor of the Exchequer, decided that the favourable moment had come early in the New Year. At a great meeting at the Guildhall on January 11th-at which the principal speakers were the Prime Minister, Mr. Bonar Law, and Mr. McKenna, the three Chancellors of the Exchequer during the war-Mr. Bonar Law explained in detail the terms and conditions of the new Loan; the prospectus was issued to the public next day. We set out below in detail the terms upon which the Loan is offered, but it should always be remembered that it is a two-sided operation:

(a) The State invites the holders of the various short-term securities (see above list, with the exception of War Savings Certificates) to convert their holdings into loan stock. At the same time all holders of the second 4 per cent. War Loan are permitted to convert their holdings into new loan stock, in such a way as to get their interest raised from 4 to 5 per cent.

(b) The State asks for the subscription of new money from all citizens who have money ready to invest, or who can arrange in any way to get the money (e.g., by borrowing it at a bank and arranging to pay off the loan out of future savings).

He

There will probably not be much difficulty about the conversion, since the financial advantages are so attractive and no fresh subscription of money is required. What the average citizen has to do is to do his duty in the matter of provision of new money. will be well paid for what he does, but we do not appeal to him on any such line. The State wants the money for a war in which our highest ideals and our most vital interests are at stake, and it is the plain duty of us all to lend the State every penny we can honestly lay our hands on. Do not let us think that because we read (as we can and do read) in the papers that this successful company or that wealthy man has applied for some large and imposing amount of War Loan that we are thereby absolved from contributing our £5, or £100, or £1,000. The Chancellor of the Exchequer can only get the new money he needs if the subscribers to the Loan are counted by the million. To the last German loan there were some four million subscribers, to the one before considerably over five. Let us see, if with a less population, we cannot in this country at least equal these figures.

Mr. Bonar Law's Warning.

We give elsewhere a good many extracts from the eloquent speeches made at the Guildhall meeting by Mr. Lloyd George, Mr. Bonar Law, and Mr. McKenna. But we must give here a very important passage from the speech made by Mr. Bonar Law:

'We make this appeal on one ground which is strong enough, and it is the sense of patriotism, the love of country, of the people of this nation. It is on that ground that we appeal, but perhaps I may be permitted to say-and it is not unimportant that anyone who invests in this loan will not do a bad transaction. He will invest on better terms than have ever been granted in the past, and I venture to express the belief, on better terms than he will ever have again in the future. We have short memories, but if we throw our minds back three years, how impossible it would have seemed that a security on the strength of the United Kingdom would yield 54 per cent. Throw your imagination forward to the future years after we have obtained victory. The people will wonder why we paid so high a rate and will doubt whether we ought to have paid so high a rate. Let me say this, and I say it not only on behalf of this Government, but I am sure it would apply to any Government, that so long as there is money in this country the war will not be stopped, the progress of the war will not be hampered for the want of money. The conditions of this country make it necessary to buy abroad; the result is that the rate of interest for home money is much higher than it would have been but for the necessity of keeping up our exchange. There is a limit to the price which those who are responsible for the government of this country are justified in paying for money, having regard to the whole obligations of the State. That limit has been reached in the issue which we are now making to the public. So far as I can judge, the future, and so far as, if I continue to be Chancellor of the Exchequer, I can control the future and I am sure the Prime Minister, who shares my views, will express the same opinion from the point of view of the Government of which he is the head-so far as we can foresee or control the future a higher rate of interest will not be paid. If it should fail-and I know it won't--I know it won't-the

resources of civilisation are not exhausted. There are other methodsand if other methods are applied the rate will not be 54 per cent. If there is anyone who is inclined to hold back, with the idea he would get better terms in the future, then I think he will be mistaken."(Guildhall, January 11th, 1917.)

There is no need here to dot the i's and cross the t's. The warning is as plain and unmistakable as we hope and believe it is unnecessary.

The Prime Minister's Appeal.

The Prime Minister, in the course of his eloquent appeal to his fellow countrymen and women, said :

Men and women of England, Scotland, Wales, and Ireland, the first charge the first charge upon all your surplus money over your needs for yourselves and your children should be to help those gallant young men of ours who have tendered their lives for the cause of humanity. The more we get the surer the victory. The more we get the shorter the war. The more we get the less it will cost in treasure, and the greatest treasure of all, brave blood. The more we give the more will the nation gain. You will enrich it by your contributions-by your sacrifices. Extravagance-I want to bring this home to every man and woman throughout these islands-extravagance during the war costs blood-costs blood. And what blood? Valiant blood-the blood of heroes. It would be worth millions to save one of them. A big loan will save myriads of them; help them not merely to win; help them to come home to shout for the victory which they have won. It means better equipment for our troops. It means better equipment for the Allies as well, and this and I say it now for the fiftieth, if not the hundredth time a war of equipment. That is why we are appealing for your subscriptions. We can do that. Most of us could not do more. what we can do it is our duty, it is our pride to do."—(Guildhall, January 11th, 1917.)

But

We should indeed have fallen low as a nation if we paid no heed to this appeal to our patriotism.

The War Loan in Brief.

We proceed to give a summary of the conditions upon which the War Loan is issued.

Amount.-No precise sum is asked for. The Loan is for an indefinite amount. The least that is asked for is the most. one can subscribe.

Every

Interest. The basis of the Loan is the issue of Five-per-cent. Government Stock at 95. This means almost exactly a yield of 5 per cent. to the investor. There is also a tax-compounded Loan at 4 per cent. This is to be issued at par, and the Four-per-cent. interest will be exempt of Income Tax other than Super-tax. The interest on the Five-per-cent. Loan will be paid in full without the deduction of Income Tax, but holders of the Stock who are liable to assessment for Income Tax must include the interest they receive in their Income Tax return, and the interest will be assessable to Income Tax " at the rate appropriate to their respective incomes.' Foreign and Colonial holders of the stocks are not liable to British taxation.

Redemption.-The Five-per-cent. Loan is for a period of thirty years. The Government reserve the option to redeem it at par at the end of twelve years (1929), and if they do not exercise that option the Loan will be repaid at par in 1947. The Four-per-cent. ("Income-tax compounded ") Loan may also be redeemed at the option of the Government at the end of twelve years (1929); failing that it will be repaid at par at the end of twenty-five years (1942).

Sinking Fund.-A Sinking Fund is to be set up for the purpose of providing against depreciation in the market prices of the Loan. The Treasury undertake to set aside monthly a sum equal to oneeighth of one per cent. of the amount of each Loan to form a fund to be used for purchasing Stock or Bonds of either Loan for cancellation whenever the market price falls below the issue price. If the unexpended balance of the fund reaches £10,000,000, the monthly payments will be suspended, but they will be resumed as soon as the unexpended balance falls below £10,000,000.

Conversion of Prior War Loan and Short-term Securities.-The new Loan gives no right of conversion for the Three-and-a-Half per cent. War Loan, but it offers the option of conversion to holders of the Four-and-a-Half per cent. War Loan, and holders of the Five and Six per cent. Exchequer Bonds, Treasury Bills and War Expenditure Certificates. Holders of 4 per cent. War Loan and Exchequer Bonds may convert their holdings in whole or in part, and receive in lieu thereof (a) £105 5s. 3d. of the new Fiveper-cent. War Loan for each £100 of stock or bond converted, or (b) £100 Four-per-cent. ("Income ("Income Tax compounded ") War Loan for each £100 converted. Holders of Treasury Bills will have a right of conversion at a discount rate of 5 per cent., and holders of War Expenditure Certificates a similar right at a discount rate of 5 per cent.

Payment of Death Duties.-Arrangements will be made for the acceptance by the Commissioners of Inland Revenue of Stock and Bonds of these Loans, at their respective issue prices, with due allowance for any unpaid interest accrued thereon, in satisfaction of amounts due on account of Death Duties, provided the Stock and Bonds have formed part of the estate of the deceased for not less than six months immediately preceding the date of death.

No Conversion Into Any Future Issue.-Holdings of these issues do not carry any rights of conversion into any future issue that may be made by the Government.

IV. THE EMPIRE AND THE WAR.

Help from the Dominions and Colonies. The following is a summary of developments in January. Naval and Military Assistance.

Canada. It was reported on January 19th that during the first fortnight of the month 3,540 Canadian recruits joined the Oversea battalions. A few days later came the intimation that of the 390,000

men enlisted in the Dominion since the beginning of the war, 178,537 were recruited during 1916. The military district of Toronto stood at the head of the list with 85,384 men.

Gifts of Various Kinds.

Hong Kong.-The Government of Hong Kong has offered a sum of £589,000 towards the prosecution of the war, and the offer has been accepted by the Imperial Government.

Bechuanaland.-Chief Linchwe, Paramount Chief of the Bakhatla Tribe, of the Bechuanaland Protectorate, has forwarded £356 14s. to the High Commissioner for South Africa as a contribution from members of the tribe for the purposes of the war.

India's Munificence.

A message from Delhi, dated January 17th, stated:

"The steady flow of contributions of all kinds to the war and relief funds from Princes and all classes of the community continues unabated, and the general determination of every section to prosecute the war to a successful issue is stronger than ever Among the gifts may be mentioned one lakh of rupees for the Imperial Indian Relief Fund, as well as the loan of his splendid residence in Bombay for a war hospital, from the Gaekwar of Baroda; four and a-half lakhs from the Princes, chiefs, and peoples of Rajputana to the King-Emperor for aeroplanes and machine-guns; a motor-launch from the Maharaja of Travancore; ten thousand rupees from the Maharaja of Burdwan; and many other valuable donations. The Rao of Cutch has offered to defray the expenses of one Indian regiment at the front for another year."

Canada's Contribution.

The Duke of Devonshire, in opening the Canadian Parliament at Ottawa on January 19th, spoke of the splendid part which was being taken by the Dominion in the world-wide struggle, and said he looked forward to Canada's ability to exercise an ever-increasing influence in bringing the war to a victorious conclusion. The speech closed with the following passage:

:

"The lofty patriotism, fine courage, and inflexible purpose which have animated all His Majesty's Dominions in upholding our great cause are in nowise abated. In common with the rest of the Empire the people of the Dominion are firmly resolved that in this war, which has entailed so much sacrifice, and which they have undertaken for the highest ideals of humanity and civilisation, their efforts shall be continued and strengthened until they have been crowned by an abiding peace."

The Dominions and Final Victory.

Mr. Lloyd George dispatched the following telegram on December 19th through the Colonial Office to the Prime Ministers of the selfgoverning Dominions:

"On taking up the high office with which His Majesty has charged me I send you, on behalf of the people of the Old Country, a message to our brothers beyond the seas. There is no faltering in our determina