FINANCIAL. NOTES
DECLINE IN TILE FRANC.
DESPERATE situations, it is well known, may call for desperate treatment, and with large lines of Government obligations falling due, financial critics will not perhaps be disposed to censure unduly the latest proposals of the French Finance Minister whereby a still further huge increase in the note issuing powers of the Bank of France is to take place. Ap- parently it is the idea of M. Caillaux that this expansion is to be a final one and to form the prelude to operations in the direction of stabilization. This view is borne out to some extent by the fact that it is to be followed by a new 4 per cent. Gold Loan based, on the dollar, and, with guarantee to the purchaser against the effect of any depre- ciation in the franc. On the other hand, as has been pointed out in the Times and elsewhere, much must depend upon whether the full expansion in the Note Circulation of the Bank of France becomes necessary or not. If it does, then in fin- tionazy influences. are bound to follow, and experience has shown that when once those forces gain the mastery there is - great difficulty in calling a halt. At all events, it is not very encouraging to find that the franc during the past week haS-
with the exception of the famous. slump of eighteen months ago—established a fresh low record at over 10 per cent. and although there is general unanimity in the reports from France as to confidence being reposed in M. Caillaux, that confidence has not yet been displayed in a recovery in French currency.
EFFECT OF REPARATIONS.
From all who were present at the recent Conference at Brussels of the International Chambers of Commerce I hear good reports of the admirable speech delivered by Sir Josiah Stamp on the subject of Transfers. Under this short title Sir Josiah Stamp dealt at close quarters and very exhaustively with the general attitude of the various nations towards the effect of German Reparation payments. It is, of course, a matter of common knowledge that while all concerned in re- ceiving either Reparation payments or interest on Interna- tional Debts clamour for the terms of the bond, such clamour- ing is generally accompanied by acute apprehensions of the effect of the payment of these Reparations or interest pay- ments in the form of goods and services. In other words, there is fear that local industries and local employment may be affected.
A COMMON SENSE VIEW.
Sir Josiah Stamp takes- the broad and common sense view of the subject when he says in so many words : " Of course, there must be certain drawbacks connected with the receipt by one country from another of an abnormal amount in goods and services, but it is a case of calculating how the thing works out on balance." Moreover, as he says, a country cannot eat its cake and have it too. If it wants Reparation payments or the full interest warranted by the bond," then it must be ready to pay the price. And then, in practical fashion, Sir Josiah Stamp suggests that, assuming Reparation payments are required, it is for the receiving nation to use the sum paid in Reparations or interest payments to relieve its own Budgets, and, therefore, aid its own industries to meet foreign competition. There are few countries which do not need to be reminded of the practical points raised by Sir Josiah Stamp, and the manner in which the United States appears to have taken umbrage at the implied challenge to the American policy of raising a high tariff wall would seem to show that in that country the shoe pinches rather hardly.
NEW CAPITAL ABSORPTIONS.
On more than one occasion when commenting upon the set-back in gilt-edged securities I have suggested that ample recognition should be made of the extent to which the situation has been affected by large new capital creations. When allowance is made for the trade depression and for the presumable reduction in saving power, it says very much for the inherent strength of the investment markets that so little effect should have been produced upon invest- ment values, because although, as I showed last week, there has been a pronounced reaction during the first half of the year, it must be remembered- that it followed a great rise for the whole of 1924. Even during the past week there have been some considerable absorptions of new capital, including, for example, the taking up by Great Western Railway shareholders of _ the whole of a fresh issue of £6,000,000 in preference shares, while at the time of writing a good response seems likely to be, given to the issue to be made this week of County of Londcn Electric 6 per cent, preference shares of £1 each at 20s. 0d. a share.
MONETARY CONDITIONS.
With the closing. days of the half-year has come the usual spasm- of stringency both in -the London and New York Money Markets. At the latter centre there is usually some stringency in June, because it marks the final month of the nation's fiscal year in the United States. In this country it is a ease of window dressing for the half-yearly balance sheets, and during the past week probably more –than £30,000,000 was borrowed from the Bank of England for that purpose. With the turn - cf the month will come the usual relief and supplies of credits will be plentiful for a few days at least. On the other hand, we are approaching a period of the year when money rates tend to harden a little, and later in July the effect will be felt of the ingathering of the second instalment of the Income Tax. On the whole, however, it does not look .as if there would be any important change in monetary conditions in the immediate future, though, perhaps, the market rate of discount may tend to approximate a little more closely to Bank Rate than it did
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