INSURANCE OF WEALTH

Waikato Times, Volume 92, Issue 14369, 22 May 1920, Page 7

INSURANCE OF WEALTH

THE WORLD OF INVESTMENT. ";;; (By R. R. Mapgregrop, F.R.A.T., P.S.SJ London.) , (Continued.) Wo ended flic preceding article with the assertion that the slock exchanges achieved their ranking as sources of bank credit through soourity-pufflng. T 0.,, take an illustration at haphazard; the first gleaning of a random search into the columns of the financial jjresa. A oertain diamond company of good repute and long-standing paid in 1910 a dividend of 800 per cent, on its deferred shurcs. The magnitude of this reward tn deferred expectations was by no means a windfall of post-war extravagance. True, no dividend was paid for .1917 or 1018, still that of 1919 was a mere 50 per cent, addition to the dividend of 19.13, when the rate was 750 per cent. Now, at what increase in i!i.? capital value of the deferred shares did the stock exchange rate the dividend of 800 per cent? The equivalent capitalisation they valued at over 9000 per cent. How explain the apparent discrepancy? The excess of capitalisation probably measured Ihc stock'exchange's expectation of a bonus. And what is a bonus? It is product of a custom wrhich forbids the distribution of annual profit beyond a rale deemed decent and reasonable. Above that limit profits are carried to reserve and accumulated until such time as they can be conveniently "issued" as "capital" in the shape of a bonus or free gift to shareholders. Like many other financial devices, the bonus would seem to be a mode of securities-puffing imported from America, being probably an adaptation to English habits of the operation colloquially known as "cutting the melon." Somewhat shyly and tentatively introduced in pre-war finance, the bonus is now so thoroughly domesticated and well established an institution of the "city" that its record passes, without comment, in the ordinary news columns of the press. Thus it lias come about that these modernised stories of Alnaschar's basket are not so exceptional as might be thought. Tell the tale of tire fortunate mine in the company of those "in the swim" and you will hear it approached, equalled or capped half-a-dozen times over, end not in mining only, but throughout tli" field of investment from the making of sewing cotton and the fabrication of imitation silk stockings to the chemistry of explosives and the extraction of oil. The Speotacular Phase.

This spectacular phase of the Investment world brings about strangely ironic situations. There are publicspirted men who sacrifice time and energy to ensuring that Governments shall neither raise money without a scrutinised sanction nor expend it unchecked by a critical publicity. There are ardent personalities who give themselves lo mitigating the. struggles of classes handicapped in the race of life. There are tender souls >vho scrupulously avoid the infliction of suffering moral, mental, or economic, on all persons, high and low, with whom they are brought in contact. Of all these good folk, the salt of the earth, there is possibly not one who would experience a twinge of conscience in holding securities designed to exlract, for irresponsible shareholders, toll and tribute from the community by raising to scar-city-level the price of staple products like oil, coal, steel, copper, cotton, or other article among the necessaries of public and domestic life. In former ages and simpler limes,, when the truth that wi? are all members one of another was less obscured by social complexities, the beneficiaries of such gains would have incurred the opprobrium which carried a definite penalty. In those days "forestallers" and "regraders" were delivered on a hurdle to the public stocks; to-day the custom is reversed, for are not the public slocks delivered to the privateer investor by the obsequious Levilcs of the golden calf? The miracle that demonstrates the power and sustains the prestige of his cilll lias been discerned by the genius of .Mr Kipling. In an appeal for war-loan he told his readers how Invested money, like the Army and the Navy, is in ceaseless activity for our benefit; that in fact it works a twentyfour hours' shift, and, moreover, for absentee owners. The Dramatic Effect.

The Ironies of conduct and idiosyncracies of personality that run with the current divorce of ethics from economics arc, to bo sure, here adduced as but examples of a social process. Bounding dividends ami rocketing capitalisations, even if exceptional thing's, nevertheless produce, th sir dramatio effect: i.licy set a standard of desire#and offer a templing vision of the might-be. The rcsultanl tremors of expectancy course up and down the whole social scale. There comes about an immense diversion of energies from the making of tilings .-Hid the rendering of services to the creation of securities. Bankers, brokers, and lawyers are lured mlo ways that make I hem appear almost an organisation for the purveyance of longterm credits and there maintenance and collection. The undefined, multitudes thai stand between the dividend warrants of the rich and the easli wages of I lie workers are bedazzled by the thought of themselves recruiting the creditor classes. The i ;amo subtle temptations insensibly turn the heads of business from the arts of engineering to the artifices of profiteering. Thus there sets in a tendency to over-growth of the creditor-classes which, if not checked, may develop into something comparable to the widespread parasitism of the animal world. Economists may hint at justification in the auditors' certificates attached to big profits. But ibis is to miss the point, which is a moral or. more strictly perhaps, a psychological one. The gravamen of the charge is against the expectation of high profits on paper claims held by irresponsible shareholders. Future Values.

For the exploiting of this social situation finance lias long been elaborating both a '!<-1 ini!:• strategy of campaigning and also ladies for battalions deployed in iln- great game of securities-pulling. And for these keen exp iris in mob psychology the war was no lustrum of purification, but a time of retirement for the burnishing of their own particular weapons, as the cum nt output of the Finance Houses shows. Unfortunately there do not seem to be any ■statistical data by which to assess, In terms of the burden cm production, this vast and continuing mobilisation of future values. Silently and subtly, the system works towards intensifying lli'j [nil! of the creditor-class on the national output, lii spile of a formal maintenance of the gold standard (which the war crisis of August, 10.1-i, showed to be entirely dependent on public confidence, and so far merely nominal) there can bo little doubt that industry was, even before (lie war and indeed for a long lime back, in course of being loaded wilh an overwhelming burden of "fixed" charges. The effect was then temporarily masked by (lie economics of trust organisation, by the gnat milpul nt' gold from the mines, by the increasing exploitation of I lie "backward races," and by Die concentrated gathering of the world's raw Materials into tlie hands of the industrialised nation.--, each of whom was I'lirnuviicd with iis own "big slick." If this reading of prewar (inane be verified, ilien we perceive linance as hut the natural goal of the way we were previously going. The dominating tendencies of the former were, as wc have seen—(a) The expansion of* securities beyond produclive assets; (b) n veiled and fitful inflation ill' the currency through accumulating margins of unredeemed credit money issued against the securities;

and (c) maintenance of .gold-converti-bility as a kind of re-insurance in the periodic business of securities-puffing. Is it not through the operation of (a) and (b) continued and exaggerated during the war that we are burdened with over seven thousand millions of Government bonds and some three hundred millions of unredeemable Treasury notes? Is it not through the re-hnposi-tion of gold convertibility that the creditor-classes now propose to valorise their new securities: These comparisons, and much other evidence of like nature, compose into a presentation of the war as, in its economic aspects, a magnified version of the profiteer's ideal known in the slang of the market as a "trade boom." And as the boom has its natural sequel in the "crisis" of deflation, so from the entail of the war emerges the thorny problem of profiteers' fortunes and their influence on the cost of living. (To be Continued.) IF WOMEN ONLY KNEW. The way to keep well is to keep the kidneys well. What a lot of backache there is among women. And little wonder. A woman's work and care and worry are enougli to break down a much stronger constitution than is given to most women, or men, eit.hc/\ for the matter of that. The kidneys are invariably the, first to feel the strain, and they let their needs be known, too, very promptly. Backache is the cry for help; the cry of the sick kidneys. Doan's Backache Kidney Pill? help the kidneys, they are made especially to act on the kidneys. Mom .- Pills cure to slay cured. "• I this testimony:— Mrs C. J. Langley, sen?., Sout'.iy strect, Leamington, Cambridge, says: "Twelve months ago I used DcanV Backache Kidney Pills for a severe -u----tack of backache and kidney trouble, which had delied other remedies foi some time, and I am pleased to publicly state that these grand Pills cured me. I used lo suffer agony with my and was often in such pain that I was completely crippled and compelled to he up. 1 was also troubled with dizz.ness and felt constantly tired, having no energy for anything, but, after taking a course of Doan's Backache Kidney !':'.:•'. I was in splendid health, and 1 • • had no return of kidney trouble It's grand to bo free of the lo backache, and I was very ;; i Doan's Pills for my perfev.; Two later Mrs Langley confirms the ~'iove: "I still enjoy good health, thanks to Doan's Backache Kidney Pills. They cured me three years ago, and have kept me well ever since." Doan's Backache Kidney Pills are sold by all chemists and storekeepers at 3s per bottle (six bottles lGs Gd), or will be posted on receipt of price by l-'ostcr-McClellan Co., 76 Pitt street, Sydney. But be sure you get DOAN'S.