FINANCE—PUBLIC & PRIVATE.
[By OUR CITY EDITOR.] . .
SIGNS OF IMPROVEMENT. [To the Editor of the SPECTATOR.] SIR,—Last Friday afternoon the Stock Exchange was permitted a momentary glimpse of what might be the first effects of any real improvement in the European outlook. On the previous day Mr. Baldwin had spoken at Plymouth, and, while on the one hand his reassurance that the Government was not to embark on a policy of inflation had a good effect, it was offset to some extent by continued anxiety with regard to the European situation —which the Premier's speech had not done very much to relieve—and also by apprehensions that a revival of the fiscal controversy in the matter of protective tariffs was calculated, as General Smuts expressed it, to " tlu.o* an apple of discord" into the political arena, which might be harmful to the Conservative cause. Hence the net effect of the Premier's speech was- really of a somewhat negative character, and prices were barely steady. -Indeed, in one or two directions there was dullness owing to the fact that the French exchange weakened on fears that no response would be made by France to the Premier's appeal to her to enter a Conference. When, therefore, cables arrived from Paris on Friday afternoon, intimating that M. Poineare had expressed his readiness, under certain conditions, to take part in a Conference, and also that, subject to conditions, an American expert on any committee formed to determine Germany's capacity to pay would be welcomed by France, there was a complete volte-face in the stock markets,:and prices closed in buoyant fashion, while all the foreign exchanges instantly responded. It is true that M. Poincare's speech last Sunday, severely limiting the conditions under which France would take part in any conference, etc., damped the ardour of dealers considerably, and on Monday there was a moderate set-back in Stock Exchange quotations. Never- theless, it was felt that the situation was _not altogether without signs of improvement, and, moreover, that the veil had been lifted for a moment showing that any real improvement in the political outlook would have a con- siderable effect upon the stock markets. It is, of course, recognised that the Reparation crisis is not something which can be cleared up in half-an-hour, and that the wheels of International trade cannot be set going immediately at full speed. That very fact, however, from the Stock Exchange point of view, is a favourable one, because it means that, while almost every class of security might obtain an immediate sentimental stimulus from the prospects of a real peace and an ultimate revival in trade activity, the effect of such trade activity upon money rates must be comparatively slow, thus giving holders of gilt-edged securities ample time to effect realizations before any great rise in money rates—as the result of active trade—actually materialized. Assuming, therefore, that there will not be a relapse to the absolute deadlock of a few weeks ago, it is not improbable that renewed hopes concerning the political outlook may serve as a stimulating influence on markets during the next few weeks. Turning aside for the moment from those factors which to some extent are beyond our control, there are two points connected with Government policy which must inevitably exert a con- siderable influence in the near future. One of them is concerned with the Government's fiscal policy, and the other with a policy of further retrenchment in national expenditure. As regards the first ofthese, I do not propose to discuss at this juncture the, merits of Free Trade and Tariff Reform, concerning which I think I might say that the City is not so much evenly divided as it is almost unan0ous in believing that in such abnormal times as these. any strong and honest Government ought to be given a certain amount of free hand. Rightly or wrongly, however, many in the City believe that the advocacy at present of a policy of out-and-out protec- tionism would strengthen the hands of the Liberal and Labour Party, and the mere suggestion at the present juncture of an alternative to the present Adniinistration is an unwelcome one on the Stock Exchange. As regards the question of further retrenchment in the national expenditure, the matter can be expressed even more simply and directly. Any increase in taxation at a moment when remission is urgently needed in the cause of industry and national prosperity would, by common consent, be disastrous. And yet that is the prospect with which we shall be faced unless either reduced expenditure or new Revenues are made possible in the forthcoming Budget. I notice that a meeting of the League to Enforce Public Economy is holding a conferenc e to-day, when Sir Donald Maclean is the chief speaker. I do not like any kind of league which talks about "enforcing a policy" upon the Government of the day, and I would rather emphasise what I have said before in your columns, viz., that it is impossible for any Chancellor of the Exchequer courageously to enforce upon the spending departments economies (which may even touch matters of Government policy) unless those throughout the com- munity professing zeal for economy and a desire for remission in taxation rally at this juncture energetically, to his support.—I am, Sir, yours faithfully,
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