A LONDON LETTER.

Akaroa Mail and Banks Peninsula Advertiser, Volume LV, Issue 5624, 20 October 1931, Page 1

A LONDON LETTER.

(Specially written for the "N.Z. Financial Times.) r J.IIE POLITICAL, AND ECONOMIC CRISIS. During the past month the attention of London financial circles has naturally been concentrated on the development of the 'severest crisis experienced in ! British finance and poiitxs since 1914. While purely market qucs lions have in some cases been of considerable importance, they have been overshadowed by this one great problem which, indeed, must continue to govern the situation for some time to come. Even tolerably well-informed London circles were surprised at the rapidity with wihch the crisis j developed. In the middle of July j the first warning was given byi the large gold withdrawals which ! led first to the raising of the; Bank rate from to andj again to and secondly, toi Ithe arrangement of the re-d isi count credits of £25 million each ; in Paris and in l New York. With ! official support, the sterling ex-| change remained steady, but it i was realised that measure.) of a I permanent nature to improve 1 Britain's financial position were essential, and attention was trun ed from the purely financial to the political situation. j The outcome was the formation ot the Three-Party Government on Tues day, August 25, the final cause for : 1 this development being the disclosure that the £50 milllion credit was approaching exhaustion, as it was 1 obvious that further financial supp- J

fort from abroad would be forthcom--1 ing only on definite evidence of an , : adequate policy of retrenchment. Financial circles therefore welcomel the new Government, but their optimism was restrained by three considerations. In the first place, the opposition in the Socialist movement . was stronger, both in numbers and in personnel, than had been expected, and freed from the responsibility of , office the party may tend towards a much more advanced attitude. Secondly, whatever economies may be effected on the cost of Unemployment Insurance and in other expenditures on the social services, the balancing of the final national accounts I for the current year, and the estimates for 1932-33, must involve considerable increases to already excessively burdensome taxation. Thirdly, for the eventual maintenance of financial stability not merely must the 1 Budget be balanced, but widespread ; reduction in wage and other productive costs must be enforced to ensure , the revival of the export trade and j rehabiliation of trade balance. The • implementation of such conditions.] ! will test equally the courage of the: j Government and the common sense i j of the population at large. j

i THE MOEiN Y MiAiRK ET. I Fallowing the raising of the Ban! of England's official minimum rait of discount to on the las 1 Thursday of July, the London ppei 'market discount late for thre( I months' bills was quoted at 4 1 i I hiwas a rather wider margin below the Bank rate than had been see! .earlier in the week with the officii, rate at 3 1 /;. Rates for short loan: had already hardened owing to th( depletion of market resources by th< withdrawal of foreign balances anc by the increase in the active not< 'circulation with the approach of th< i holidays, bankers' deposits falling bj i #11 in. f'piirchrises , ' l o£'-Miis'*fef : England of U29 million in the sam< 'period. The temporary increase ir the fiduciary circulatiron of £15 million, announced on August 1, foi throe weeks and subesquently extend ed for a similar period, helped to re lieva the market stringency. Owing to an unfortunate misundei standing regarding their use, the beneficial results of the £25 million lediscount credits were not at first forthcoming. In fact, there was a sudden slump in sterling, left temporarily unsupported, on Augusl 6, and though the position was soon righted, market nervousness, in London and abroad, was naturally accentuated. In the second half of Auguse there was a revival in the demand from the Continent for bills, while money market resources were augmented by the return from circulation of holiday currency withdrawals. Short loan rates accordingly declined to around 3 1 /j per cent., while, of course, since the rise in the' Bank rate to per cent., the rate for weekly loans to the money market from the clearing banks have been stabilised at 3.Va per cent., i.e., 1 per cent., below Bank rate. In the open market three months' bills were obtainable at 4 140 j>er cent. These conditions, however, were short-lived. In the last week of the month, ofter the disclosure of the virtual exhaustion of the rediscount credits, rates again hardened. The market expected that with the political situation in hand, the "Dig Five" banks would provide resources to relieve the immediate pressure on the sterling exchange, with the assistance of New York credits, though the possibility of a long term loan, to be raised in New York and Paris, was also dismissed.

THE STOIOK MARKETS. In common with other financial circles the 'Stock Markets gave the adhesion of the Conservative Party to the Government a hearty welcome, tempered by the conviction that the j new Cabinet had a hard row to hoe. On the whole, a calm attitude was maintained during the development of the crisis, but business was reduced to a .minimum. Moreover, while there was no sign of panic the fall in prices has been considerable. Prom time to time special sections were uplifted or depressed by some of the numerous rumours which were eagerly passed on, such as the imposition of a revenue tariff or of special taxation in certain directions. The Foreign Bond market was quiet, but adverse exchange* movements affected some South American issues. Despite poor traffic returns stocks of the British trunk line railway companies improved in the latter part of the month, but there was li'ttle actual .buying. Argentine rails, like the 'Government bonds, were affected by the exchanges. In the industrial section, the general anxiety to avoid commitments was especially noticeable. Reduced or passed dividends by some leading, concerns caused particular weakness in Newspaper and Textile issues,'

while taxation fears depressed To- | baccos and Breweries. The index of thirty active industrial ordinary shares fell from 58.3 to 56.9, but finally closed at 58.2. In the miscellaneous markets, oils were- erratic, and a fair business in South African gold mines stood out against the general gloominess. The future course of markets must depend on general conditions, but the domestic 1 market position is sound, and it is thought that foreign, holdings of British indutrials have been reduced to negligible proportions, and that 'those of gilt-edged stocks are much below the levels of a short while ago. The decision to open the Exchange on Saturdays excited little comment, and it is not expected that any more .business will be attracted.

N'EW OAiFI'TIAL MiAiRKET. i August is normally a quiet month I for the new capital market, and , -with the general f uncertainty accenI ; luating the hazardousness of appeals ,! to the public at this season it is not ' surprising that the idleness of the J market was relieved by only one issue , ■—and that aroused congratulations ion its bravery rather than its opportuneness. It was made by the Blue Cross Line, Ltd., and consisted of 1£30,000 in IK per cent., redeemable ■ I preference shares and £40,000 in I ordinary shares of 10/1 each. The I company had the advantage of an exceptional opportunity to acquire ; four steamers at low prices. The J total capital raised so far in London -during 1931 is less than half that in !3930. The total, excluding conversion operations, is only £90 millions j against ttIDOU million in the corresponding period of last year. NEW LIFE A'S!SUIRiAiN>CE FIGURES'. The official figuies now to hand' .show that despite the deepening (the Uade depression nW" life :f during that yeai 4 increased over the previous year. Whereas other departments such as fire and accident have to some extent suffered, the trade depression appears to have imI pressed on the public the wisdom of life insurance. Indeed, there has possibly been a reaction away from saving by means of purchases of Stock Exchange securities and a cor-1 responding move towards the safetyfirst saving in the form of an insurance policy. The offices seem fully alive to this, and advertisements on the model of "My only investment which has not depreciated is my life insurance policy," are now frequently to be seen.

It is noteworthy that the new life business has increased despite the cessation of single premium policies. The Board of Trade returns show the total net new sums insured under new policies in 1920 to have been BIG 2 millions. This is the highest amount of new business yet recorded in any year, and was an increase of 1.2 per cent, over 1928. The official 19G0 figures are not yet available, but the individual accounts of a number of offices reveal, on balance,

an increase over the figures for 1929. An examination of the accounts of 49 British offices shows about £153% millions of new life business transacted in 1930, or about KQ millions more than the £929 figure of these offices, and there is little dou'bt that the complete return will also show an increase.

, BUTTER AND CHEESE MARKETS. During the past month the tone in I the butter market has, on the whole, I continued hard, and dealers on this • side are disposed to take an optiI mistic view of the outlook for the immediate future. This hopefulness is the more encouraging in that the market has had to shake off a depressing tendency arising from the German financial situation. The reduced * purchasing power of that .country forced large quantities of Danish and other Continental producing centres' butter on to the British market. In consequence stocks of butter in the early part of August were higher than those of, the corresponding date of last year, •a substantial increase in the case of cask butter being not quite offset by a decline in box butter stocks. It was worthy of note, however, that ' the Colonial butters benefitted considerably more than Continental makes from the subsequent revival in prices, 'though later .still, with an improvement in German demand, Dan j ish butter was still more prominent. This enhanced demand must, however' help all classes of butter, and with' the statistical position sound, the only possible adverse factor is the general economic situation in this country. Colonial cheeses have continued to find a market at good prices, though Dutch makes have been erratic, j Though stocks in this country are substantial, with supplies afloat of . only moderate dimensions, there is little anticipation of a weakening of prices. I

DO YOU KNOW THAT there are many uses for SANiDERIS EUCALYPTI EXTRACT. Although a fine medicinal preparation and because of its purity it can be used both internally and externally. Its beneficial effects are manifest when used internally in cases of colds, flu, indigestion, flatulence or headache. Externally it is efficacious on account of its stimulating, non-irritant action and wonderi ful antiseptic powers. Cuts, sores and I infected wounds heal rapidly when I treated with SANDER'S EXTRACT. A" few drops in half a tumbler of water used daily as a mouth-wash will prevent pyorrhoea and mouth infections. On account of its volatility SANDER'S EXTRACT is easily and completely vaporised into a powerful antiseptic vapor, which, when used as an inhalation, is a very effective remedy for colds in the head or infections of the nose. Be sure of the genuine. Refuse imitations and insist on SANDER'S EXTRACT.