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£670,000,000 if we include a stock which has been separated, called the Local Loans Stock; but the debts of other Governments have come to exceed or to approach the English amount. The Government Debt of France, for instance, is £1,100,000,000, a sum greatly in excess of the present English Debt. Then we have an Austro-Hungarian Debt of nearly £600,000,000 ; Italian, £520,000,000; Russian, £700,000,000; while there are Debts of £100,000,000 and £200,000,000 owing by quite a number of States, for the most part incurred in comparatively recent years. The English Debt accordingly does not hold the place it did in the general markets for securities, and the amount of foreign issues quoted on the London Stock Exchange alone amounts to about £2,000,000,000.

2. The proportion of the Debt itself to the total securities dealt in has enormously diminished, partly, as has been seen, by the redemption of the Debt, though this redemption, while important with reference to the amount of the Debt, does not seem to be of importance as compared with the growth of other securities, which is the main cause of the change in proportion between the English Debt and those other securities. This change in proportion has already been indicated by the facts stated as to foreign Government Debts and issues. But a fuller statement may be useful. be useful. Whereas sixty or seventy years ago

the English Debt amounted to about one-third or one-fourth of the whole capital of the community, it is now perhaps no more than one-twentieth. Whereas formerly it was almost the sole Stock Exchange security, it is now less than one-tenth of the securities quoted on the London Stock Exchange alone. The exact figure of such stocks quoted in the official list of the London Stock Exchange at 31st December, 1898, is stated to be £7,609,000,000, of which, as already mentioned, about £2,000,000,000 are foreign Government issues. In addition, the markets for securities all over the world (in the United States, in Germany, in France, in Austria, in Italy, in Russia, and in our Australian Colonies and South Africa) have increased in even greater proportion; and as they all form practically one market, the relative importance of Consols has greatly diminished. Many securities are dealt in in more markets than one, especially Government securities; but making all deductions for such double entries, one can hardly be wrong in estimating that the figure above stated for issues dealt in on the London Stock Exchange would at least have to be doubled if we were to include the issues upon all the different markets throughout the world. Of this vast mass, English Government securities are clearly a very small percentage indeed.

3. While the mass of the English Government Debt with reference to other securities has thus been diminishing, it is also to be noticed that the amount in the hands of the public has diminished even more than the amount of the Debt itself, and this diminution has been very marked in recent years. This is chiefly the consequence of the investment of savings bank money in Government stocks. The total amount of such savings bank money is now about £180,000,000, all of which must be invested in the English Government Debt, while other amounts of stock are held by other departments of the Government. It would seem that admitting the amount of the English Government Debt to be £630,000,000, or £670,000,000 including the Local Loans Stock, nearly the whole of it in excess of £400,000,000 is held by the National Debt Commissioners for the savings banks or by other Government departments. The small amount which can be dealt in is shown in another way. The amount of the leading stock, Consols, actually quoted in the Stock Exchange official list is £522,000,000 ; and if we allow that some part of this amount is held by the savings banks and other Government departments, though their holdings, of course, are not exclusively in Consols, we can easily see that the amount of Consols themselves in the hands of the public is probably not much more than £400,000,000.1 When it is considered, moreover, that the greater part of this sum is locked up, being held by trustees and other holders who are not in a position to sell, or by banks who are not so limited, but who prefer for various reasons to invest in Consols or keep a portion of the reserve in Consols, and who never sell, it can be quite well understood that the amount of the stock available for actual market purposes is so small as to take from it not merely the predominance but the pre-eminence it once had among securities dealt in on the Stock Exchange.

4. What is equally undoubted is that the stock in the hands of dealers, technically or practically so, has so greatly diminished that now the markets for Consols cannot properly be called a great leading market at all. There is no longer a class of large holders interested in the security constantly ready to buy and sell, and consequently in Consols there is no longer that sort of market which has been described above as a free and natural first-rate market on the Stock Exchange. I am assured that as a matter

1 This is quite confirmed by the last returns as to the holding of Government securities by the different departments of the Government.

of fact the number of capitalists constituting the Consol market, and able to engage in large business, has conspicuously diminished in the last twenty years, till now it is quite obvious that the market is insignificant, to a degree, compared with other markets on the Stock Exchange.

5. Theincrease of savings bankmoney has taken place very largely since 1895, when the annual addition to the deposits in the savings banks from being about $4,000,000 to £5,000,000 suddenly went up to over £10,000,000. And this change is coincident with a change in the relative prices of Consols and the leading debenture stocks of railways, apparently indicating that Consols during the last two or three years have been subject to especial influences. A few years ago the 3 per cent. Debenture Stock of the London and North-Western Railway stood at 124, while Consols were at 114. Now the 3 per cent. Debenture Stocks of the London and North-Western Railway are at 111, showing a loss of 13 points, while Consols are about 110, showing a loss of four points only. Consols have thus been sustained by a cause not applicable to first-rate securities generally, and the explanation, no doubt, is the application of the savings bank money to investment in Consols.

As the whole result, we may say that Consols during the last quarter of a century, and especially during the last few years, have lost the characteristics of a first-rate market for securities. They are of less amount in themselves than they were; for various reasons the whole amount is not upon the market at all ; and now the market is so small that there is no free dealing in them, such as is necessary for a first-class market. There is, in fact, what one may call a corner in Consols, and as in all corners, the present price is not a real indication of what the market would be when natural conditions are restored.

In the circumstances we may expect, then, that if there are large new issues, this will so alter the general condition of Consols that the premium due to what we may call the present corner must disappear. That premium would seem to be from 5 to 10 per cent. in amount, which may be considered an extra premium not indicating any special credit which the English Government has, but merely the special conditions which have made Consols scarce; when the stocks become abundant again all this premium will disappear, and the price of large new issues will be determined by the circumstances of the issue and the general state of credit. The English Government will still hold a premier position, but it would not be more than a shade better than other first-class borrowers. In the event of a first-class war, in fact, English Government securities stand to lose not merely the 15 per cent. which is likely to occur in all first-class securities, but the extra premium of 5 or 10 per cent. which has come about in consequence of the corner in Consols.

This being the position, what may be considered, apart from Consols, the general level of credit at the present time? I have to submit the following short table, showing the prices of the leading first-class securities :

French 3 per cents....


90 United States 4 per cents..

130, equal to 3 per cent.

at 98 Russian

100, equal to 3 per cent.

at 75 New South Wales 3 per cents.

101 Indian Government 24 per cents. (gold)......

94 Canadian 2) per cents.

91 Metropolitan

97 London County Council 2 per cents.

95 London and North-Western Railway 3 per cent. Debenture Stock

111, equal to 24 per cent.

at 92


Great Western 24 per cent. Debeuture Stock

From these figures we may consider that the general level of credit at the present time is represented by the price of the best 24 per cent. Railway Debenture Stocks, viz., 92, or, at most, something intermediate between that and the 2) per cent. stocks of the London County Council, or of the Indian Government, viz., 94 or 95. An easy calculation would thus show that the probable price of the best new issues at 21 per cent. in the event of a great war, allowing for a 15 per cent. fall, will be something a little over 80, or, say, 85 ; the corresponding price of the 3 per cent. issue would be over par, but there would, of course, be special difficulties in connection with an issue of stock over par. These would also be about the prices, I believe, at which the English Government could borrow, assuming that the present extra premium on Consols due to artificial causes is 5 or 10 per cent. A reduction of 10 per cent. from the present price of Consols would bring them down to about par, and from that a fall of 15 per cent. would give the price of 85. A good deal will, of course, depend upon the exact amount of the present artificial premium on Consols. But whatever we take it to be, some allowance must be made practically for the existence of such a premium when business comes to be done.

It is of little use quoting expert authority in such matters, for experts are not unlikely to differ ; but a few weeks ago I happened to obtain the opinion of a gentleman, since deceased, who would be universally recognised in the City as one of the best authorities upon such a point. As it happened, he had also considered the matter very fully. His opinion was that in the event of a great war and of large issues of Consols by the English Government at 23 per cent., the price would probably be about 80, and the price for 3 per cents would be a little over 90.

Other authorities seem inclined to think that the prices in the case supposed would be higher than these; but I do not know of any authority who was quite so well qualified as the friend to whom I have referred, or who had so fully entered into all the pros and cons of the subject.

Of course, these calculations do not carry us beyond the actual beginning of a war and the beginning of large issues consequent

What would happen as the indirect result of all the commotion and excitement attendant upon a war, and the great efforts which might have to be made to carry it on, is a little beyond even the slight prevision which may be considered possible on the assumption with which we started. The great point is that we must not assume too hastily that there is not going to be a great fall in Consols, quite disproportionate to what there may be in other first-class securities.

upon it.

I might stop at this point, having answered the question put; but there is a practical issue on which the facts stated appear to have some bearing, viz., the question of the use of a sinking fund for the redemption of debt or for the accumulation of a reserve against emergencies by a Government like our own. The bearing of the facts stated seems to be that the credit of the Government for purposes of business is not improved by the redemption of the debt or by the accumulation of a reserve fund against emergencies, because its credit is already of the highest possible quality, and its borrowing power will be regulated accordingly by the general conditions of credit, and not by the increase or decrease of the debt by a few millions annually. The Government is one of many first-class borrowers, and a little redemption of its own debt does not seem to matter as far as its credit is concerned, one way or the other. This may seem a hard saying; but when we perceive the credit of a country like Russia increasing from year to year, notwithstanding increasing debt, and the credit of a country like France increasing the same way, we have surely

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