PROSPECTS FOR GILT-EDGED If, as seems likely, a higher income
tax is avoided, why should there be any serious depreciation in the level of gilt- edged prices ? The argument of the pessimists, it seems, is that whether taxation is increased or not, the Government is going to borrow more for rearmament, which means that the supply of securities in the market will be increased. Against probably something less than £5o,000,000 for 1937-38, the Government has announced its intention to borrow £90p00,000 in 1938-39. This is admittedly a " bear " point, but it need not bring lower gilt-edged prices unless the increase in borrowing outruns the growth of the nation's savings. It is estimated that at present national savings are accumulating at an annual rate of over £35o,000,000, and when the flow of capital into private investment channels is as restricted as it has now been for many months, this should be sufficient to enable the Government to carry through its programme without upsetting the market. While a really substantial rise in gilt-edged prices above today's levels is not to be expected, I shall be surprised if there is any serious fall this year.
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