COMMERCIAL AND FINANCIAL.

Evening Post, Volume LXXXIII, Issue 26, 31 January 1912, Page 4

COMMERCIAL AND FINANCIAL.

♦ - Evening Post Office, Wednesday. GILT-EDGED SECURITIES. Presiding at a meeting of the London Joint Stock Bank, Lord St. Aldwyn Etated that nine of the largest London banks had written off £6,283,000 *f 0r depreciation of gilt-edged securities since 1903. This is. a very large amount, to be written off in a few years, and Consols are responsible for most of the money. This premier security has receded in value very considerably in recent years, and' there is a disposition to attribute tho decline to politics. This is accentuated by tho reference made to tho matter by Mr. Bonar Law, the Leader of 'the Opposition, in his recent Albert Hall speech. Calmly viewed, there is nothing political in tho decline ; it is tha natural result of the Working of economic laws, and ia easily explained. For the forty years 1835-1874, the price of Consols fluctuated between somewhat wide extremes, though when averages are worked for decimal periods' they present very little , divergence. Thus the average price of Consols for

On the average for the whole period, 92J, or say 93. The rate of interest- on Consols until the sth April, 1889, was 3 per cent., go~ at 93 they gave tin average yield of £3 4s 6d pet cent. To, give the same yield with their present rate of interest of 2£ per cent, the price must be 77£. Tha price, according to the last cabled quotation, is £77 7b 6d, or 2s 6d below what should be tho average. Between the period 1875-1907, Consols were greatly inflated through heavy purchases on Savings Bank Account, and high-water mark was reached in- 1907. In- that year the inflation ceased, and the downward tendency began. At the average price of 93, whioh was the average for the 40 years, 1835-1874, the return on Consols was approximately £3 4s 6d per cent., with the interest at 3 per cent. ; with the interest at 2£ per cent, 'and' the price at' about 77|/the same result ie reached— 'that is, the return is about £3 4p 6d; and there is no chance or mere coincidence in this. The average Bank of England rate for the 42 years 1867-1903 was £3 5s sd, during which time the United Kingdom was- not visited by-'&ny treat finanoial panic i Though within this 2 years the rate varied from 9 per pent to 2 per cent., yet averages for decimal periods present very little difference. Mr, A. H. Gibson, in his valuable annual publication, "Bank Rate," remarks: — "It is true that the Bank of England operates its rate according to its reserve and the state ; oi the oxcliunges, but what causes the point of equilibration to centre at 3£ per cent.? How many bankers realise the iru9 significance of this average? It is the pivot not only of finance but of commerce. Bankers could not alter the average for any length of time, even if they wished. In reality it can neither^ bo said that the bank rate governs the market rate, or the market rate governs the bank rate. Both *re_ but. agents of a primary cause, the con; ditions of life ; and if to, the average bank rate a hundred yeai's hence will be practically the same as the average for the'j last thirty or forty years, provided natural forces are allowed free action. The condi* tion3 of life are such that the average person must pay back to humanity during his lifetime his debt of , labour for having lived in the world and iisefl. its. . 'commodities; The percentage paid back per annum on the average yioldf op liquid capital should therefore approximate to and be repre-s sented b^ the general formula : One hundred .divided by-.- Jexpaotatioa -of 'life at commencement of labour period'— expectation" of life at end of labour, Beriod)." „ THE BUTTER MARKET. j Accordhjg to th& #[igh Commissioner's cable message,! the market is quiet, but Tiolders are tirm. This confirms private messages, which state that "the. acCUmula'■tjoss of thepa&t weik '.have'.'nbfr* all.'tioep ' cleared, and: the demand for salted ""was' better than uhsalted. Np decline in values is anticipated and that seems likely I unless European supplies come iv early. l la Australia ,^he sUJ^ieß, both from, the/j coast' a*hd inland districts are falling oil";: fapjdljV afygLitjis expected that they will eontjnlie to fall' in the face of the slight drought at present being experienced.! 'The retail pr{ce has been, advanced it* England, .and', this is expected to check; consumption- by fully 25 per cent. If so this should bring some-measure of relief.,; Tka«utlo6k in NeW Zealand is -nOt' verypromising for householders, who >vill inj the* wintar" months be obliged to pay anythjng up to 1b 5d or perhaps Is 6d per lb for butter. • A-London -report, dated 22nd December, \ states that there was an excess of Australian unsalted butter on the market' more especially that without preservative, and there was practically no Continental demand for the latter. Secondaries qualjtiesj both salted and unsalted, were making relatively good prices, and buyers were hunting round io vfand s eofnething, just a few enillings under the top prjee, Messrs W. Weddel and Co. stated, on the same date that the 4 week covered -py the- report had been one of the dulfebt and wettest experienced that winter, and the provision trade had been adversely affected by it. The demand for Australian butter had bean- • weakened by -the belief of the trade .generally that after Christmas there was bound to be a fallun prices, and consequently many had bought only sufficient supplies to carry them Up to that date. Notwithstanding that, there has been a good trade, and stocks to -"be cariied over the holidays would not b,e large. As we kitow since, there has been no appreciable decline iv /allies. -: - COST OF LIVING. Even in high plaoes the steadily upward movement in the cost of living is Beginning to be, felt. Proof, pf this comes from Argentina, where " ihe reeentlyappointed United States Minister tendered, his resignation of the nomination, and gave as hie reason {or that step the '/high cost of living in Argentina." It ib something-, mope than mere, .coincidence that^ a Similar course was adopted by the Italian -Minister stationed in. the South' American Republic, and on .ihe same grounds. These incidents have .impressed ! the Argentine Government with 'the 'eeriousnes? of th» position, and jt has appointed a special committee to conduct an investigation aa to the causes, etc. Meanwhile the press of the -country openly declares that prices for the commodities listed in the category of human needs are ''abnormally high." It certainly seems an apomaiy that in, a cpuptry like Argentmaj whioh is one^ of the leading^ grain and meat- producing countries in the world^ the cost 'of living should be higher 'than- in 'countries to which its products' are. exported. Such, however, is the case.-Ever-expanding taxation, has, of course, much -fo do- with tho increase.. Th» autffdrities mU6t have money, and the nation, provinces, and municipalities are consj/antly adding to their budgets to mqefc juoreaeed expenditure- on their part, much of which -is needless. Although $he, value of the paper dollar has been stationary noyr for.'many years, and there 1 Is a,mu<^h larger amount in circulation fully guaranteed by gold reserves, its purchasing power has decreased The cost, of labour has gone up considerably, and ihe men not only receive 1 higher wages, but work much' fewer hours, and this has been perhaps th-e primary causeof increase. It is not expected that much good will dnsue from the report that is tobe prepared by the investigating committee. AUSTRALIAN TRADE. Australian trade for 1911 established a new record, the, aggregate of the imports and exports being £146,344,529, as - compared with £134,505,501, thus showing an increase of £11,839,028. The importe in 1911 totalled £66,860,303, as against £60,014,351 in 1910, an increase of £6,845,962, which is considerably oVer 10 pei cent. -The exports amounted tq. £.79,484,226, as compared with £74,491,150, an mdrease of £4,993,076, equal to about 6£ per cent. There has obviously been a certain amount <?E overamportiiig .in Australia. The returns for the gast five year? show ac under: —

' ' imports. Exports, Tl. Trade. Tear. £ £ £ 1907 ... 51,809,033 72,824,247 124,633,280 1908 ... 49,799,273 64,311,068- 114,110,331 1909 ... 51,J71,89£ 65.31&836 116,490,732 1910 ... 60,014,351 74,491,160 134,505,501 1911 ... 66,860,303 79,484,226 146,344,629

The 10 yeara 18354844 was 92i „ „ 1845-1854 „ 94± t, „ 1855-1864 „ 92£ t , „ 1865-1874 „ 92