The Press. FRIDAY, OCTOBER 11. 1007 THE SLUMP IN STOCKS.

Press, Volume LXIII, Issue 12932, 11 October 1907, Page 6

The Press. FRIDAY, OCTOBER 11. 1007 THE SLUMP IN STOCKS.

According to a telegram "which "wo publish this morning, Lord , Rothschild is .reported to have stated in tin interview thnt storks r.rc- low because Govern menta nil over tho world are hitting at capital. No ono is in a. better position to speak with authority on such a subject as tho groat financier in question, end no may l>o sure- that ho would not commit himself to such a. statement without hiving very definite ground to go upon. At the- same time, it is only fair to point out that uiv doubtcdly other causes have lice.it at work to produce tho extraordinary nhrinkago in securities, especially those of tho 'higher class, which has token place. English Consols niul English rflilwuy stocks are examples <vf what wo mean. Ten or twelve years ago capital was rapidly accumulating from tho sivings of tho people, ond opportunities for safe investment, especially of trust moneys, -woro limited. In thceo circumstances Consols roso as high os 111, and thero were not wont* ing financial prophets who said that " per cent, would Ixvome the standard rate for money. They littlo foresaw tho stupendous changes about to tako place. Tho South African wer aod' tho Rueeo-Jopeneeo war brought about an enormous destruction of capital, and lod to a feverish demand for money. Under tho old regime the English Government waa buying i considerable quantity of Consols ©veiy year, and it looked as if tho National Debt w«s iv process of gradual extinction. With tho outbreak of tho war, not only did tho sppeyments cease, but tho British Government cxmo into the market as a borrower, co that tie national debt, which was reduced to jCo'IW.OOO.OOO in 188y. rose to £790,000,000 in 11XV5, or en advance of over £160,000,000 sterling. The great fires iv San Francieco

and Valparaiso converted tho insurance companies from buyers of Consols into sellers, and thus further depressed the market. Tho widening of trustee*' powers in regard to investments led to Consols being neglected in favour of securities returning a higher rate of interest. Not tho least important factor in bringing about the- dump in gilt-edged securities is tho great activity in trade and manufactures which has been witnessed during the last few years, with a consequent demand for capital at a higher rate ot interest. Aa "Tho Times -, recently pointed out, business men do not want to buy or hold threo per cent, investments at a timo when they can make a great deal moro in their own businesses. Even when a man retires from trade nowadays ho does not withdraw his capital and invest it in Consols, or railway stock, or debentures, or something equally safo as he used to do; ho very frequently turns his busi-

lipss into a joinfc stock company, and leaves hi 3 capital in tho firm in. tho comparatively si.fo. ehaipe of debentures or preference shares. Another contributing factor has been tho borrowing for public -works in India, Kgypt, South America, and elsewhere, and tho enormous increase of municipal borrowing in. England—all offering higher rates of interest than the old-fashioned investments which, have fallen into disfavour. The position, is unsatisfactory from tho point of view of banks, public companies, and private investors who bought Consols and rail-

way Btoclia some years ago, and now find their capital shrunk by perhaps as much as thirty per cent. Obviously it "would be, a eerious matter also for the British Government if it found it necessary to borrow a large amount of money to carry en a great war. Yet the position is not altogether without compensation. The difficulty of raising loans to prosecute a war is in itself a strong argu-

ment for maintaining peace. The man of saving habita who wishes to provide for his declining years, thanks to the higher rate of interest, dors not now find it necessary, if he it medcrato in his expenditure, to ainnsa such a largo sum before ho enn retire as was formerly neoeesaxy. Nevertheless dear money undoubtedly checks tho development of new industries, end restricts production, and in this way tends in time to bring about, a slump in trade which ifl more serious to the community at large than a slump in stocks. The worst effects of tho anti-capitalistic movement to which Lord Rothschild refers, will ho seen when capital is not only diverted from the purchase of Government stocks, but is deterred by timidity from embarking in industrial enterprise. It is an old. saying, and a truo one, that nothing is so oaeily frightened aa a thousand pounds—except two thousand pounds.