The Dominion. MONDAY, NOVEMBER 1, 1909. IMPERIAL CONSOLS.

Dominion, Volume 3, Issue 652, 1 November 1909, Page 6

The Dominion. MONDAY, NOVEMBER 1, 1909. IMPERIAL CONSOLS.

= The continued decline in the price of, Consols eoenlß to havO led. some people to como to the conclusion that this premier gilli*edgod security-of the world has lost its< prcominoneo, and : that British credit is net as strong or as paramount aB it, , Wftfi, ■, It is needless to gay that such conclusions are erroneous, and ate based on falsis premises. It is, however, true that Consols at tho present titne have lost manyof thoir.old attractions. They-have not their fcrmer dominating power over inafkets as a wholfl, which CaUsed them to bo, classed as tho most, sensitive political barometer in Europe. Not bo,very long, ago it would have been taken as an axiom; of Thrcgmorton Street that a change fromi active trade and a high b&nk rate' to : Black tlmss a fid easy money would have been followed by a corresponding advance in tho price of Consols,; During the,past; twenty months following the collapse 1 of the last trade boom at the end of 1807 there has been, very little'! .resiliency fob- •! sorvablo, and this fact'has tended to'mislcad pooplo into, tho belief that there has > been a -serious, depreciation in the national credit. "Consols'.', is a slang-abbre-viation--which.'Jias.: become good English. |,li v is short for Consolidated Stock, and means a stock which has«.'beon made up ; of sevoralj or many j different stocks "consolidated" into ono. From a very early date the British National Debt lifts, cbrisistod of-one: groat stoekj ai it were,'..and r, Various other more or less temporary securities, terminable annuities, Exchequer 1 bonds,, Exchequer bills, and-Treasury: bills. .There has also been in existence nearly always pormanent stocks, bearing; differont rates of interest, and every how and -then operations of credit have been offected whereby, thosfe floating or frag-, mentary and .isolated stocks havo been "consolidated," or absorbed into one chief, stock known as " Consols," or the " Funds," or the " Funded Debt." The last groat scheme of consolidation was offocted in 1883 by Me. Goschbn, .under which stocks of the nominal value of £825,200,363 wore dealt with. These were mostly 2 per ccnt.,' and by the convei'sion sclicme the Interest was reduced to 2J per cent, from April B, 1889, and to 2j per cent, from April 5, 1903.' The highest and lowest'prices for fourteen years will afford eomo interesting: information, The figures are as under:—

Year Highest Lowest Year Highest Lowest. 2| o/o - J!' £ , 2Jo/o £' .£ 1856 ... 1131 ; 105} 1903 03 13-13 86} 1697 ... 113} , 110} ■ 1904 01| 85 1898 ...113j 106} 1003 01 16-16 87} 1899 .... 111} 073 .a 906 01 8-16 '85 0-16 1900... 103} 06} 1907 87} BOJ ,1901,1.. ' 97}- ;91 1908 - 88} 83} : . 1902 ... 97{ 92} 1909 .: .80 ' 8213-13 Not only has the price steadily receded,, but the difference between the highest and lowest figures has tended to increase.

, li is when. we examine; the yield frer I cent, that we arc able to get a fair view of the situation, ' Thus for the period ! 1845-1849 the average yield: oil Consols was £3 ss. 3d. per cent., in 1860-64, £3 ss. Id. per cent., in 1870-74, £3 4s. lOd.; per cent., and for more recent periods 'as under: — ■..•. • _■ - ■ v ■ I . ■ ■ i.sV'd. -3880- ;8i 2 19 11 per cent. . • 1885- 89 : 2 10 4 „ „ 1890- 94 ............ 2 16 4 ~ ~ !•' 1895- 99 2 10 3 ~ 1900-1901 2 17 0 •.•1905 2 15 8 „ ■ . .. 1306 2 18 7 „ . . 1907 . '. 2 19 5 „ : • ■ • 1908 ;. a 18 .9 „•.. „ ■ y 13(6-1908 i.r 2 17 6 „ • ; The average for the current ypar will, probably amount to £2103. 6d. percont., as the prices on the average are lower. For the 40 years, 18354874, :; the' price fluctuated between somewhat wide ; extremes, but the average for tho whole period was abotli 83. • The period 1876-1907, co far as Consols are concerned,.; has been, one' great period .of inflation varying in intensity at different times;- The sudden refiuence of capital'on-the. United Kingdom consequent on the of imports ;over exports l caused the prices of,investments. to rise, During the succeeding five yoars the Government commenced to buy Consols extensively on Savings Bank Acucouht, and thus with inflated prices tho conversion scheme of 1888 boeame a practicability. After, the scheme ■ had been brought, to a successful conclusion, tho purchases on Savings Bank Account were considerably; reduced, but in (ho period 1604 : !58, purchasing ' in ;huge .i blocks lie: came the order of the day once more. In the twenty-two years 1880-1901 the excess of purchases over sales on Savings Bank Actount amounted t6 the.-stupendous total of £150,332,762. : The price of Consols ;during/this-'.-period, has not represented true value.'. There has been much discuslion iibout: tHa depreciation that has o?v quired in iayeatmeat values since ths y&j)

1897 when high* Water mark was rcachcd j but what has really occurred has been the general disappearance, of inflation, which is still in. progress at the present time.' The average price for 40 years, 1835-1874, was 93, and as the interest rate then was 3 per .cent, the average yield at. D 3 was £p 4s. fld. per cent. To give the same yie.ld with the prc6erit rate of interest, namely 2§ per cent.,, the price will have to fall to 77J. ; On August 12, 1907, the price fell to 80|. The fall may ..be ar-. .rested temporarily by cheap money,'but,' in the long run, economic conditions must prove stronger than , human tendencies,; and step, by step tho price must' recede until the equilibrium is established;; .V.^: