A* Prosperous Yeat
Finance
As- One who has written financial. reviews of the year and" forecasts, of the future on more occasions than • he cares to- reeall, I often think it is well that future events are hidden from our eyes, if only for the 'reason that the effect- prodfieed by them is Often" so different from that which might have been apprehended. If,' for instance, when* writing twelve months' ago One could have foreseen that within the brief space of one year we should have seen the passing of a beloved Sovereign, and towards the close of the year the abdication of the greatly-loved Sovereign who succeeded him, that within a year we should have witnessed the termination of the Abyssinian War under conditions imparting a serious blow to the prestige of the League of Nations, that the year would also 'Witness the dramatic military reoccupa- tion of the Rhineland by Germany, and- last, but unfor- tunately not least, that the year would be marked in history by a bloody revolution in Spain, what kind of a forecast would one have made for 1986?
I might have prophesied that under such conditions the trade and prosperity of the country must necessarily suffer a setback, and that progress towards recovery notable in the previous year Would receive a serious check. Events, however, have shown that such a forecast Would have been hopelessly wrong, for the out- standing feature of the year 1986 has been the continued, activity of home trade and a great rise -in the market value of Stock Exchange securities.
RISE IN STOCKS.
Even as regards the national finances, the develop- ments of the year have scarcely been of a character. to aid the rise in securities inasmuch as Budget surpluses. have given place to . prospective deficits and during the year We have had the Income Tax raised from 4s. 6d. to 4s. 9d. in the E, with lively apprehensions- of increased burdens in the New Year. On the. otherpitand; it is true that one of the causes of prospect:0T who deficits— namely, the.large but necessary -expenditure on arma- ments—has played. its part in assisting the activity of home trade: At all events, prospective Budget deficits not checked the rise in securities.
NATURAL CAUSES.
To What then must we attribute the fact that the year 1936 will undoubtedly be reckoned a prosperous year in everything pertaining to trade and industry, and a year in which purchasers of securities have been able to secure handsome profits ? So far as trade is concerned—and apart from the special stimulus from Government 'purchases—I think one 'explanation is, to be found in the simple fact that jnst as .a pronounced depression in trade With falling prices in commodities is usually hard to check, So when once a trade revival gets . under 'way, and when, moreover, it is a revival from conditions. of abnormal depression, the movement goes along to some extent by its own momentum. Un- doubtedly due credit must 'be given to .the leaders of many 'of, our leading industries, 'and especially perhaps to those iri the Iron and Steelindustry-, for the fact that greater .efficiency -and greater coordination of 'effort in place -` of wasteful 'competition -has 'played its part, 'while' the 'revival in American trade has not been without its effect 'on other centres.: Th& year has seen further currency depreciations in the Slriine of the devaluation of the franc and some other currencies of the Gold bloc countries but they have been accompanied by inter- • national agreements which . have seemed' to promise greater -stability in the exchanges in the times to come, and this in its turn has raised hopes of an improvement ere long in international as well as. in home trade.
ARTIFICIAL INFLUENCES. • • Sofar, however, as Stock Exchange securities are concerned, the 'prime factor oPerating has been, the con- triefi, cheapness of money.- Bo.w. :far _the cheap neSs.
(Continued an page 1136.)
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Finance
.(Corainued from page 1134.) has been- artificial and- dependent upon Government policy .I will not stop now to enquire, but undoubtedly it has been responsible, first, for the rise in high-class investment securities to record heights, and later for the activity of industrial and other shares owing to the eagerness of the public to seek either higher incomes in the shape of dividends, or to strive for an appreciation in capital values. This advance' in the more speculative markets has been aided by the excellent ,character of the reports of many of the industrial companies, and as in the case of gold mining shares, shares of the base metal companies, and shares of industrial concerns, the rise has also been fostered by a further feature of the year—namely the great rise in prices of commodities themselves. More- over, not the least interesting feature of the year has been the strengthening of our gold reserves so that the Bank of: England closed its year with an increase of well over ' £100,000,000 in its stock of the metal. And so the year promises to close with good records in the matter of home trade and domestic financial activities. Next week I will touch upon the probability or otherwise of these developments extending into 1937.
ARTHUR W. KIDDY.
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