TRADE AND FINANCE.

Globe, Volume XXII, Issue 1919, 19 April 1880, Page 4

TRADE AND FINANCE.

[London " Daily News," February 22nd.] Much money has been " made " the rise in prices. Every one in the city is cheerful. A year ago mo3t people were sad. Firms which were bankrupt in the sense that their assets, if realised at preos then currant, would not have equalled their liabilities, subsequently surmounted thoir threatened difficulties, and have now a balance on the right side; owners of plant, of public add other securities, even of land, have sat still and complacently seen the money value of thoir capital increase by surprising strides. Factories, works, mines, and warehouses, are now going concerns, and are valued as such. Everything has lately worn an appearance of cheerfulness and confidence. That there should be an end to the excessive depression in the commercial atmosphere is not at all surprising ; the wonderful thing in the present cheerfulness is that it came about, not because trade had revived, but because it was expected to revive. Notwithstanding the bad harvests in this country, including Ireland, low wages, hostile foreign tariffs, and so on, it was felt that the required impetus had been given, and that nothing, not even afo-eign war or a warlike government, will materially reverse the upward movement in prices. Since this time last year there has been an extraordinary enhancement in all market values. Scotch pig iron, for instance, shows a rise of 60 per cent ; finished iron nearly 40 per cent. ; , metals, a rise varying from 10 to 50 per cent. ; cotton has advanced 40 per cent., wool 20 per cent., flax and hemp from 10 to 50 per cent., silk 30 per cent. In the produce markets wo find a rise of 10 per cent, in sugar and coffee, the comparison always being made with prices at the close of February last; of 25 per cent. in tallow, 20 per cent, in oil seeds, 25 ppr cent, in hides. An advance of 30 to 40 per cent, in chemicals ia aUo brought out by the comparison. Provisions, such as butter and bacon, show a distinct rise ; in Eotatoes it is as much as 40 per cent., and in ops nearly 2UO per cent. While English wheat is not much higher than it was a year ago, this being attributed to the poor qual ty and condition of the home crop, the market prices of imported grain show a considerable rise. Even in this respect the deficient producs of last harvest cannot bo said to have decreased the money value of the capital in the trade ; foreign wheat has come in so largely, and at prices so advanced that at least as much money changes hands in the corn trade. Prices have risen in the stock markets in nearly every case 5 per cent during the past twelve months, and in that of home railway ordinary stocks 10 to 30 per cent. It is difficult to find a single marketable commodity or socurity which does not now require much more money to deal in. On all kinds of capital profits are now made, and the capital which yields profits has a money value which it lately had not. It is to the point to notice the augmentation of capital value.!, for capital tends to rise in the Bame proportion as the interest or profit which it bears—say, the dividend on Greit Western Kail way stock rises 25 per cent, and the stock rises 25 per cent, in market value also, which is no imaginary instance, and the enhanced value of the capital makes its possessor mnch and immediately richer than before. Great Western stock, which was at 95 last year, had lately advanced to 120, this being a gain of .£25 per £' oo stock to the holder ; but in comparison with this his gain in dividend is nothing, or only about 15s per cent. More or less, the capital employed in brinqing produco to markot fluctuates somewhat similarly in proportion, but more widely than the value of such produce. The most intangible and invisible form of capital, such as the connection with buyers and sellers which a broker has created or inherited, becomes worth more than it was. His commissions increase, and at a very similar rate the value of his " business " becomes enhanced ; a money business, such as that of a banker or underwriter, in which nothing visible is produ;ed for consumption, and in which no capital is to be seen or handled. i 3 clearly a more valuable business when profits aro made than when lossas are suffered in it. Last year there was peril in the lending, and on the other hand little effective demand for accommodation, and bank shares fell ; but that form of capital has since improved in market valne. As an illustration which will be more readily grasped, let us take the market value of the shares in sixteen Sheffield joint-stock works. Summed up the total was. at the end of last August, less than four millions sterling ; three months later it was 6J millions, the additional market value of the shares being therefore 2i millions. There was no increase in profits anything like this increment. The faot was simply that the improved prospects of the works induced buyers to appraise the aggregate value of the shires at an equal proportionate and of course greater absolute improvement. The owners of the shares accordingly feel themselves, in the aggregate, millions richer than before ; and this rise in capital values, spread over almost every conceivable property in the kingdom, ha 3 "made the owners elated and happy. In such times the seeds of futnre panic are sown. All, or nearly all, of this increment of money value is but a matter of account. There is no morn money than before in the world. Quite modern instances could be given of single firms or persons who aro reputed to be "millions" richer than they were twelve months Ago, merely through the augmented value of the railway, mining, or landed property in which they are interested. But if such property were brought forward for sale it is conceivable that some of the millions would disappear. Balancesheets no doubt show assets of augmented market value, but we may be sure that in some form or o.her the liabilities have augmented also. It is held of a certain very experienced person that he has laid down this principle: "A man of business ought not to be over cautious; he ought to take what soem good things in his trade pretty much as they come ; he won't get any good by trying to see through a millstone; but ho ought to put all his caution into his reserve fund ; ho may depend on it he will be ' done' somehow before long, and probably when he least thinks it; he ought to heap up a great fund, in a shape in which he can use it, against the day at which he wants it." Probably this will be done by nine out of ten, but the tenth will look upon the augumented appraisement of his capital as sheer profit, and involve him=elf in dangerous commitments accordingly. There is no immediate danger of over-trading, we shall be told ; and that is very likely true. People in particular markets and traders feel richer, but at present they have had little time to becomo extravagant or excessively venturesome. We should at the present time hardly expect a merchant, with any trading capital at all, to be brought up by an accident; he might be called upon to provide large sums which had not been directly prepared for, but the augmented value of capital ■would enable such a one, in most cases, to raise sufficient money, where a yeir ago an accident of the kind would have meant ruin. Sooner or later, as the practical authority above quoted observes, basiness men are apt to be ; ' done," notwithstanding the good things of which the rise in prices is one, unless a reserve be cautiously kept. The Bank of England is brought more eloselv than any other Bank or person is to the necessity of au adequate roserve at all times. At the present time, with the oxpans ; on of money values just described all around us, there is a modorato cash reserve in the Bank. What accidents may happen at home or abroad no one can say; but that caution would not be misapplied in keeping up a large Bank reserve we venture to insist. The world's supply of gold is becoming inadequate to the money liabilities of the world which have to be met in gold ; and in this view tbo news from India of a large discovery of gold, calculated to add five millions sterling, or 25 per cent., to the total yearly production, is of the greatest importance. As it is, we are threatened with recurring periods of tight money, merely from an inadequate supply of gold.