FINANCE - PUBLIC AND PRIVATE • Wiir.N all allowance is made for
such factors as the disturbing financial situation in France, Budget un- certainties and the approach of the Easter holidays, the general tone of markets during the past week must be described as very satisfactory. The outstanding feature of the week has been the success of the new issue of 31 per cent. Conversion Loan for £30,000,000, and the circumstances surrounding the issue deserve attention as affording an indication of the sound condition of the investment markets and also of the state of the National Credit. It must be remembered that the recent offer of £30,000,000 Conversion Loan followed an issue of £60,000,000 last January, so that within three months the market has absorbed about £90,000,000 of new stock with scarcely a ripple of disturbance of price levels, which is really a remarkable feat even after allowing for the fact that both issues were made in connexion with maturing short- dated obligations.
THE DAMNING 5 PER CENT. RATE !
Moreover, strange as it may appear, after all that we have heard of the damning effect of the 5 per cent. Bank Rate upon the National Credit this latest issue of Conversion Loan was placed as easily and upon as good terms for the State (which means, of course, the taxpayer) as the previous issue when Bank Rate was only 4 per cent. Much has been heard of the millions a year which the higher rate was to cost the nation, while, according to Mr. Wheatley, the higher cost of interest was to be on a scale adding enormously to the rents of houses. Yet in this, the first long-dated loan made by the Government since the Bank Rate was raised to 5 per cent., we find the issue nearly three times covered and the rate virtually identical with that of a few months ago. Nor would the sound monetary policy of the debt redemption of the past few years seem to have impaired the taxpayers' interests when it is recalled that within four years we have had the basis of Government borrowings gradually reduced from something like 51 per cent. to the present level of about 4?i per cent.
GOLD RESERVES INCREASING.
In view of the possibility of a return to the Gold Stan- dard it is also satisfactory to note that the Weekly Return of the Bank of England made up to the 1st inst. was the strongest in most respects for the past five years, the Reserve in fact being the highest since the early part of 1920 ; while the total of coin and bullion of a little over £128,000,000 was also the highest for about three years. Moreover, it must not be forgotten that the Reserve is really somewhat stronger than it seems, because about £27,000,000 in hank-notes have been gradually placed in the Currency Note Department. Still, when it comes to the actual proportion of cash to liabilities it must, of course, be recognized that we are far below pre-War strength, and that is a fact to be carefully remembered when calculating the effect upon the course of money rates of a return to the Gold Standard.
TUE TROUBLESOME FRANC.
It is certainly with no desire to indulge in any kind of national glorification that one is compelled to contrast the results of the financial and monetary policies in this country during the past few years with the conditions which are now being revealed in France, where, partly as a result of imperfect budgetting and Currency and Credit inflation, and partly as a result of unwise tactics with regard to External Debt Obligations, a further serious fall has occurred in the franc. Moreover, whereas a year or two fTo the fall in the franc was mainly due to foreign speculative operations, the unpleasant feature of the more recent sinmp has been the extent to which it has been caused by the French people taking flight from their own currency-. A COMPLEX SITUAtION.
There is all the more sympathy here, however, with the troubles which France is now experiencing, because we have ourselves, in lesser degree perhaps, been through the same mill. Nearly all the belligerent coun- tries after the War committed the error of acting as though no serious losses had been entailed and continued extrava- gant expenditure and inflation when there should have been economy and, if not deflation, at least a curbing of inflation. In this country Mr. Lloyd George, no less than French statesmen, vowed that the costs of the War should be all paid by Germany, and therefore placed false standards of effort and of living before the nations. In this country, however, it was not very long before the controllers of our monetary policy began to get busy and were instrumental first in bringing about the necessary pressure of public opinion to secure some economies in National Expenditure, and subsequently a balanced Budget followed by Debt redemption. Finally, when it became clear that the United States was in no mood to recognize the War Debts of the Allies on other than a strict business footing, we faced realities and funded our Debt ; and in so doing probably reaped an advantage in improved credit and exchange far outweighing the additional burden of the Debt service itself.
COURAGEOUS ACTION NEEDED.
In France, however, where admittedly the post-War problems were in some respects more difficult than ours by reason of the millions which had to be spent on rebuilding devastated areas, there was less readiness to face the stern facts of the economic results of the War, with the inevitable result of the reactionary crisis. As in Germany so in a secondary degree in France inflation has served for a time to give employment and even to impart an air of prosperity, but the inevitable reckoning has to be faced. In a country such as Great Britain, dependent so greatly upon outside sources for the necessaries of life, the evils of inflation are felt more quickly, but even countries like France cannot hope to escape the consequences of unbalanced Budgets and excessive expansion of credit and currency. It is difficult to say whether the present currency crisis in France will be quickly and successfully surmounted or not, for so much depends upon the measure of courage and determination with which the Government and people are prepared to handle the situation. There is no reason why a country so rich as France should not easily overcome her present difficulties and become more prosperous than ever, but the turn will not come until all the realities—including the need for funding External War Debts—have been freely and frankly faced. As with the individual, so with a nation, there always appears to be a reluctance to face and make provision for the whole of the facts, but it is not until this is done that the necessary spur to effort is obtained, and it is not until to the outside world there are tangible signs of this course having been pursued that there comes the restoration of credit which ultimately aids con- valescence, and finally contributes to complete recovery.
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