FINANCE—PUBLIC AND PRIVATE.

EUROPE'S CHAOTIC EXCHANGES.

EXAGGERATED APPREHENSIONS—POLITICS THE KEY TO THE SITUATION—INTERNATIONAL CO-OPERA- TION REQUIRED—INVESTMENT STOCKS FIRM— HUGE LOAN FLOTATIONS — INDUSTRIAL DE- PRESSION.

[To THE EDITOR OF THE " SPECTATOR."]

Sin,—The general public must often be inclined to despair of obtaining anything appmeching an intelligent comprehension of what is involved in the chaotic exchanges of Europe. One day, for example, we are informed that Germany, partly by reason of her depreciated currency, is going to defeat the whole world in the matter of her export trade ; and, conversely, we are told at another time that America is actually seeking a decline in the exchange value of the dollar, if only to ensure that her own export trade is maintained. Yet, in spite of talk of this description, we are also treated of late to lurid articles maintaining that unless something is done soon to relieve the Foreign Exchange position as a whole, and to aid those countries where currencies are most depreciated, there is to be an appalling financial crash in Europe the like of which we have not seen, etc., etc.

* * * I do not think that those who warn us of the serious consequences which must ensue if greater attention is not given to the matter are entirely unjustified in their utter- ances, though, like the Fat Boy in Pickwick, they seem at times to be trying to make our flesh creep with their sen- sational forebodings. What I think, however, is very necessary, is to recognize that it is upon International politics that attention must, in the first place, be focused. If, for example, as an outcome of the Washington Confer- ence, the double object should be attained of a great reduc- tion in National Armaments, combined with an equal, or rather with a greater feeling of international security, the first great step would have been taken towards the financial and economic rehabilitation of Europe. It is undoubtedly most essential here, and in all parts of Europe, that internal credit resources should be diverted as far as possible from unproductive to productive expenditure if Budgets are to balance, and yet, so long as the fear of war haunts the vision, we are not likely to see the end of wasteful and destructive competition in armaments.

* * * Similarly, if the Washington Conference should result in the re-establishment of international peace on a firmer basis, and above all should result in a very close and cordial understanding between Great Britain and the United States—and, it is to be hoped, Japan—it would then be possible to aid some of the distressed countries of Europe along lines really conducive to recuperation. It is, how- ever, of the essence of the problem that there should be absolutely united co-operation, because while the lack of such co-operation may easily result, as it has done up to the present, in an unconscious and involuntary unity in a policy of doing nothing, the moment a positive and con- structive policy is initiated the need for real unity on the part of these strong nations becomes imperative. It is imperative primarily because the task is beyond the power of any one nation. It is imperative in the second place because those who render the aid must be powerful enough to insist that the help is not frittered away, and that in return for it the devastated countries shall take their part in putting their own financial affairs in order. In the third place, united action is imperative because there must be an agreed policy with regard to the amount of the credits and the proportion taken by each lending country, as well as with regard to the manner in which the credits are used. In a sense, of course, this would mean a temporary interference with what might be termed the ordinary freedom of inter- national trading, and, therefore, there should perhaps be a set time for the period of such united and uniform action. At the outset, however, it seems certain that unity would be required as much for the working out of the schemes of assistance as for the actual strengthening of the credit system which would have to be employed.

* While, therefore, the reports which have been cabled from America to the effect that the Conference at Washington will be followed by another conference on the economic conditions of Europe may be premature, I ion inclined to think that not only would such a conference be the logical outcome of any satisfactory termination to the political discussions, but that sooner or later such an assembly, followed by united action, will be found to be inevitable.

Meanwhile, the Stock Markets pursue the even tenor of their way with no great regard to such matters as the Irish crisis and the developments in Egypt and India ; to say nothing of the economic conditions of Europe as a whole, to which I have just referred. This, I have already explained in your columns, is not altogether surprising or even illogical, for the simple reason that depressed trade emphasizes the glut of money seeking investment, while uncertainty and perhaps apprehension with regard to the outlook tends to drive these funds into gilt-edged securities. All the same, the strength of these Investment Markets has received a pretty severe test during the past six weeks, when not far from £60,000,000 of capital in gilt-edged stocks alone have been sold to the public. Here, for example, is a list taken almost at random showing a few of the main issues since the end of September last, arranged in order of their appearance :- Union of South Africa '

• • .. 6 p.o. £5,000,000 Ceylon .. .. • •

6 p.o. £3,000,000 New South Wales ..

13 p.o. £3,000,000 Nigeria ..

0 p.o. £3,000,000 Com. of Australia ..

6 p.o. £5,000,000 Local Loans ..

3 p.o. £20,000,000 Kenya Colony ..

6 p.o. £5,000,000 West Australia ..

• •

6 p.o. £3,000,000

• •

6 p.o.

£2,000,000

Port of London. . Union of South Africa

• •

6 p.o. £6,000,000 Total

• • • •

£55,000,000

In the case of the Local Loans stock, allowance has to be made for the fact that it was offered at 52, and, therefore, the actual amount subscribed was nearer to ten than twenty millions, but even so the total is an extraordinarily large one, and that the capital should not only have been provided within so brief a space of time, but that the Investment Markets should have been the firmest section of the House in spite of the issues, is quite remarkable. Moreover, in some cases applications have been on a very large scale, the Port of London issue, for example, having been covered something like ten times. During the past week the second issue within a couple of months of a loan by South Africa certainly came as a rather unwelcome surprise to the market, but, on the other hand, it is recog- nized that in this case all the money is required for repaying short-dated indebtedness in the market here, whereas in the case of Australia there is a feeling that there has been a good deal of over-borrowing. This over-borrowing, together with the tendency towards Socialistic finance in Australia, had possibly some effect in making the last response on the part of the investor in respect of the West Australian loan a poor one. * * * Apart from the Gilt-edged Market, the other sections of the Stock Exchange have been irregular and somewhat dull during the past week. Foreign stocks have been unfavourably affected by the dullness of the Paris Bourse, which in its turn has been disturbed by the Egyptian news and the uncertainty with regard to developments at Washington. The advance in banking and insurance shares continues, but the Home Industrial Market remains under a cloud owing to apprehensions with regard to the forthcoming reports, while statements such as that of Burberrys, Limited, published last week, show in startling fashion the appalling after-effects of the premature trade boom early in the present year. This concern, which was floated as a public company as recently as January of last year, now discloses in its report a trading loss for the year ended March 31st last of no less than £410,000, after writing down stocks in trade, both delivered and contracted for, to market value at the date of the balance-sheet. A further provision has also been made of £100,000 as a cover for any decline which may have since occurred, while to meet the deficit a reduction has to be made in the capital account of £350,000. Statements such as this—and it is to be feared that the end of the year will bring a batch of melancholy reports from other industrial concerns—naturally prevent any improvement in the Industrial Market. * * * Nevertheless, a hopeful undertone continues to characterize the Stock Exchange as a whole, and for the moment the factor to which perhaps chief attention is given is the continued abundance of money for investment and the prospect of investment resources being further increased on December 1st by the distribution of over £50,000,000 in British Government dividends. Moreover, attention is given in some quarters to the statement this week by Governor Harding, of the Federal Reserve Board in America, as to the possibility of still easier money rates in the States. Whether his predictions will be fulfilled remains to be seen, but I cannot help thinking that inasmuch as one must refuse td regard the present trade inactivity as more than a passing phase, any revival in commercial operations, and the continuance of new capital flotations, would prevent the likelihood of the prolonged duration of very cheap money.—I am, Sir, Yours faithfully,