TRADE AND FINANCE.

Oamaru Mail, Volume IV, Issue 1251, 21 April 1880, Page 2

TRADE AND FINANCE.

(Daily News, February 22.) Much money has been " made" by the rise in prices. Every one in the city is cheerful. A year ago most persons were sad. Firms which were bankrupt in the sense that their assets, if realised at prices then current, would not have equalled their liabilities, subsequently surmounted their threatened difficulties, and have now a balance on the right side ; owners of plant, of public and other securities, even of land, have sat still and complacently seen the money value of their 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 oheerfulnesa 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 sq on, it was felt that the required impetus had been given, foreign war- o.r $ warlike Government, will materially reverse the upwa,rd movement in prices.

Since this time last ye,ar 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,4o per cent. ; metals, a.rise varying from 10 to 50 per cent, ; cotton has advanced 40 per cent., wool 2Q per cent. , flax and hemp from JO to 50 per cent., silk 30 per- oent, _ In the produce markets we 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. per cent, in hides. An advance of 30 to 40 per cent.!in chemicals is also brought out by. the comparison. Provisions, such as butter arid bacori, show a distinct rise ; in potatoes it is as much as 40 po.v gent., and in hops nearly 20Q per 'cent. While Englj§|i wheat ia not much higher than it ■ was" a year ago, this being attributed to the poor quality and condition of the Home crop, the market prices of imported grain show a considerable rise. Even in this respect , the deficient produce of last harvest pap not b$ said to nave decreased , the money value of the in the trade ; foreign wheat has come in so largely,: and at ; prices so far advanced, that at least as much money changes hands in the corn trade. Prices have risen in nearly " every 93.5e {j per cent, during the past JSj months, and in that of hooie railway ordinary stacks 10 to 3Q per . cant. It is difficult to find a, single marketable commodity or security whioh does not now require muoh 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 values, for, capital tends to rise in the samq "proportiori ' as the .intent or profit which it the dividend on Great Railway stock rises 25 per oent., and the, stock rises 25 per cent, in market valuo also, whioh' is no imaginary instanoe,'and the enhanced value of the capital makes its. possessor much and immediately richer than before. . Great Western stock, which was at 95 last year, had lately advanced to 120, this being a gain of L 25 per LIOO stock to the holder ; but in comparison with this his gain in dividend is nothing, or only about 153 per cent, More or less, the capital employed in bringing produce in the marketfiuctuatea somewhat similarly in proportion, but more widely than the value of suoh pro--, duce. ' The most intangible and invisible form Qf 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 v becoTnea. enhanced j a money business, such as that of a banker or under:v; i , in '.viiich iiothins vHble is proil T-i- <•,"»* juiij'• i- •;:> -iikl in AviuVa no i:,v, in«i • is lie so- jr-o!-"!i:iiuT!t 'l, is'"clearly .l ni'ii'i; val'i:o'io lii'.oUiuss wh"ii ;u-o Sih ui w! 10 1 .'ire %i\'r v f jJ ia i'\ year .thews' wa? P«''i! ;ii the lending, and on the other hand' ]ic.tle effective demand for .accommodation, and bank

shares fell; but that form of capital litfa since improved in market value. ; 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 6fmillionS, the additional market value of the shares being therefore 2\ millions. There was no increase in profits anything like this increment. he fact was simply that the.improved prospects of the works induced buyers to appraise the aggregate value of the shares' at au equal propor- * tionate 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 has made the owners elated ahdl happy. In such times the seeds of future; panic are sown. .

All, or nearly all, of this increment of money value is but a matter of account. ' There is no more : money than before in the world. Quite modern instances could be given of single firms or persons who are 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 propertywere brought forward for sale, it is conceivable that some of the millions would disappear. Balance-sheets 110 doubt show assets of augmented market value, but we may be sure that in some form or other 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 bes over-cautious; he ought to take what seem good things in his trade pretty much as they come ; he won't get any good by trying to see through a millstone. Bat he ought to put all his caution into hia reserve fund ; he may depend on it he will be ' done' somehow before long, and probably when he least think it; he ought to heap up a great fund, in a shape in which he can use it, against the day at which ha wants it." Probably this will be done by nine out of ten, but the tenth will look upon the augmented appraisement of ;his capital as sheer profit, and involve himself in dangerous commitments accordingly. There is no immediate danger of overtrading, we shall be told; and that is very likely true. People in particular markets and traders feel richer, but at present they had little time to become extravagant op excessively venturesome. We should at the present time hardly expect a merchant,, with any trading capital at all, to ba 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 year ago an accident of the kind would have meant ruin. Sooner or later, as the practical authority above quoted observes, business men are apt to be "done," not withstanding the good things of which the rise in prioea is one, unless a reserve be cautiously sept* The Bank of England is brought mora closely than any other bank or person is to the necessity of an adequate reserve at all times. At the present time, with the expansion of money values just described all around us, there is a moderate cash reserve in the Bank. What acoidenta 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 whioh have to be met in goldand in this view the 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.