1 SEPTEMBER 1939, Page 30


As I write the crisis nears its climax. It may possibly be resolved before these lines are printed. Whatever the outcome, the City may be proud that it has provided no casualties in the war of nerves. Drastic restrictions on the normal functioning of financial markets have inevitably been imposed but there has been no panicky liquidation or loss of morale. The Stock Exchange, that most vulnerable point in our social system to mass psychology, has kept perfectly calm and given no hint of apprehension. Indeed, the performance of the stock markets, which has provided a most unpleasant shock for the " bears," has been altogether remarkable. Gilt-edged stocks, it is true, have had the buttress of officially-fixed minimum prices but have actually been bought early this week slightly above these minima. Home industrial equities, after a momentary shudder, have held firm as a rock, oil and base metal shares have moved up and gold shares have risen quite sharply as a result of the spectacular rise in the price of gold. Thus, the policy of holding on which I have advocated in recent months has been amply justified on purely financial grounds as well as from the broader social standpoint.

As for the official steps which have so far been taken to tighten up our financial defences, they have been well conceived and are proving effective. The fixing of minimum prices for gilt-edged has safeguarded the market's sheet anchor and although the prices fixed are, in my view, rather out of line with the new level of money rates, they are such as have inspired confidence in investors. It is a striking commentary on the effects on City mentality of a prolonged period of cheap money that the raising of the Bank Rate, a normal precaution in crisis times, should have taken both Lombard Street and Threadneedle Street com- pletely by surprise. In fact, surprise in some quarters has been tinged with criticism on the ground that a jump (sic) from 2 to 4 per cent. is a panic measure.