FINANCIAL NOTES
The Stock Markets have been so completely under the influence of Budget expectations during the last few days that it will not be until the details of Mr. Winston Churchill's statement have been carefully digested that markets are likely to settle down into anything like normal conditions. On Monday, for example, there is little doubt that the election of Ilindenburg as the German president would have had a decidedly unfavourable effect on markets but for the fact that attention was so concentrated upon Budget conjectures as to obscure other considerations while imagination was also being stimulated by the remarkable rise in sterling.
* * * * A RETROSPECT.
If, in July, 1914, it had been predicted that the normal quotation of $4.861 to the £ was to fluctuate between some- thing like $6.50 and 83.20 to the £, there would probably have been few prepared to credit the forecast, or, if prepared to accept it, there would have been direful expectations of a financial crash. As a matter of fact, at the time both of these extremes were touched conditions were exceedingly difficult at the respective centres. The occasion of the British standing at such an extraordinary premium was within a month or two after the outbreak of War, when the calling in by Great Britain of her enormous foreign balances caused such pressure on the part of America to remit that the exchange went to the level quoted, and matters were only relieved by America sending some millions of gold to ease the situation. Then, of course, came the complete reversal of these con- ditions. Having withdrawn our balances, we commenced purchasing both for ourselves and our Allies in America and other neutral countries on a scale which caused a great collapse in the British £ so that at one time it fell to something like 13s. as expressed in American currency.
A Goon RECOVERY.
For some days before the Budget expectations as to Gold Standard possibilities were stimulated by very pro- nounced buying of sterling from New York where expectations of our early return to the free gold market seem to have been even more confident than those indulged in London. And while, no doubt, the rise in the American exchange of the last few days must be attributed more to semi-speculative oper- ations based on Gold Standard expectations than to any real change in the economic position, there is none the less something distinctly inspiring in the fact that we now have the British £ standing at the highest level for rather more than ten years.
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AFTER THE EVENT.
It is usually inadvisable to rely too greatly upon tha endurance of first effects of a Budget upon the Stock Exchange. Writing, however, on the morning following Mr. Churchill's statement, it is interesting to note some of the first effects. Among British Funds, Victory Bonds have promptly risen on the increase in Estate Duties, the reason being that holders of those Bonds have the right to tender them in payment of Death Duties. Industrial shares on the whole have been favourably affected, and such shares, for instance, as Courtaulds and Listers have risen sharply, the first impression apparently being that the concerns may benefit more from the protective character of the new silk duties than from the effect of countervailing duties and any possible diminution in consumption.
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EMPIRE BANKING DEVELOPMENTS.
A good many rumours have been circulated of late with regard to the possible further expansion of banking activities in the Empire. Whether there is any connexion between these rumours and a statement made in the Report recently issued of the Colonial Bank, remains to be seen. It is, however, certainly rather striking and even suggestive to find that, although the present authorized capital of the Bank is £5,000,000, of which only £3,000,000 has been subscribed and £900,000 paid up, it is now proposed to increase the capital to £10,000,000. At the recent meeting, however, the Chairman stated that " their bank, with its high prestige, might well be the foundation on which a much larger and more comprehensive institution might be built—an institution of the greatest possible help in Empire development."
A. W. K.
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