THE MONEY MARKET.

Dominion, Volume 4, Issue 941, 7 October 1910, Page 4

THE MONEY MARKET.

.lmperial Consols appear to be specially affected just now and a now record low level of value has been established during the week. Consols touched £79 18s, 9d., but have since recovered to £80. At the beginning of the year the price was £82 7s. 6d. April opened with the quotation at £81 ss. At the' beginning of June the price was £82- 17s. 6d. ; on June 7 there was a drop to £81 7s.- 6d., rising the following day to £81 17s. 6c1., declining again on June 9 to £81 2s. 6d. On the last-named ; date the Bank of England discount rate was reduced from 4 to 3| per cent. By June 10 the quotation had risen to £82 ss. A month later the price was £82 2s, 6d., and by the first week in August there was a drop to £81 10s. On September. 4 the quotation was £80 15s. ex interest; on September 16 there was a further decline to £80 10s.; on September 2G it was £80 2s. 6d. On September 29 the Bank rate was advanced from ,') to 4 per cont. The price now is £80, and the return to i.the -investor ia eaual to £3, -2s.' 6cL.

per cent. This is a higher return than the average.for any year since 1880, In 1896, 18.97, and 1898 Con-

sols'touched l over £113, but the rate of interest thon was £2 15s. per cent. Since the rate was reduced to 2i per cent, that is on April 1, 1903, the highest price touched .'was £93 16s. 3d.' in- 1903, and the,' lowest, apart from the quotations of this year, was £80 15s. There is really nothing very remarkable or in any way alarming in the fall in Consols. Practically all ■ investment stocks have declined. According to the Bankers' Mayazine (London), which deals with 3S7\reprcsentative stocks, in tho month from June 20 to July 20, there was a depreciation of £26,000,000 as compared with the values of the previous month, and up to August 20, there was a-further depreciation of ten million's sterling. There has been much discussion about the depreciation suffered by Consols since 1897 when high-water mark was reached,. but what has really occurred has been the general disappearance of inflation,. which is still in progress. The average price of Consols for 40 years, 1835-1874, was £93, and as the interest rate then was 3 per cent,- the average yield at £93 was £3 4s. 6d. per cent. To.give the same return with the present rate of interest, namely 2iper cent, the price must fall to £77. 10s. Tho fall may be accelerated by dear money or bo arrested temporarily by cheap money, but in the; long run economic conditions' will prove stronger than human tendencies, and step by step the pricemust recede until the equilibrium is established. The present extraordinary disturbance- is due to, dearmoney, and the indications are that there has been some hasty liquidation.. From this-we should say that Bank rate has gone .up another, point; if so, we should hear to-day that the Bank discount rate has been advanced from 4 to 5 per cent. A rjeriod of monetary, stringency has been predicted and it is probable that the dearer money time has arrived. -,--.' , •'■ :'"....'.'■