The sun. [volume] (New York [N.Y.]) 1833-1916, 1903-03-30
TIE FINANCIAL SITUATION.


the rates OF interest for the use OF money
for either long or short periods are es'so
lished upon a certain average basis LOT
any considerable length OF time, the prices
Of securities in that country VIII o~ ne
wise established in such manner tpat tue
interest return afforded by them WIN ho'
be greatly lower than that received rom
loans Of cash direct. certain hmi'eo
class OF securities will. Of course. sell 70
as TO Weld to the investor less than the
sums described. Such securities are, az
a rule. Government. State and municipal
bonds. and the class Of invest ments speci-
fed by law as those in which trust iunos
NAV be placed. Similarly, railway or IN
dustrial bonds whose value Is reoos-
nized by everybody as being ~ Tar oeio"
the market value OF the properties on which
thew are a lien that their margin OF Sc
curity Ia very great, will usually be 10
much in demand that they will sell 30 as
10 Weld a comparatively small interest fe-
turn. But the general principle stands as
stated. Whenever money 10 wanted 30
greatly In a country-not for rev weeks
or even for a few months. but continually
that people are willing to pay high rave
for its use that rate fixes the value Of all or
dinary investments. People will not ouy
railroad stocks returning only per cent
when they can lend their money to business
men on undoubted security for six months
or A year at Q Der cent, and they will sell rail-
road stocks OF this class for the purpose
Of loaning money In this way. An exoep-
tion to the rule is, Of course, the possibility
OF a deal" affecting some particular rail-
road stock whereby the value OF the stook
10 enhanced by causes wholly uncon,
nected with the question OF its d,Vioeho
rate. In period Of active speculation ana
imitation Of values such IDEALS are not I'M
common; but even in such periods th9 time
arrives at last when everybody realizes
that the day Of deals has disappeared
and that the price Of stocks must be gov.
erned solely by the safety OF the principal
invested in them and by their net return to
the purchaser. ,
No extended argument should be neoes-
.arv to convince any intelligent person
that the day has more than dawned in our
land when the study OF the security
market should be wholly directed to these
two questions: First. Is 1t true that money
in this country 10 to command interest
at the rate OF between S and per cent
for at least a year to GOMEZ and, secondly.
IL the preceding question 10 answere"
in the afYirmative what effect will the fat
have upon the price Of stocks 1t 10 OF
great importance in answering the FIRST
question correctly to observe the present
demands upon credit all over the world. In
London, still the worlds financial centre,
the demand is particularly acute. AFTER the
close OF the Boer war, scores. almost nun
dreds, Of underwriting syndicates OF every
description were formed, based upon the
idea that the gold production In the Trans
wal would largely increase and that Dig
.boom' in values was at hand. These ex-
pectations have been sadly disappointed,
and the schemes based upon them have, al
most without exception. collapsed. English
financial houses are, in fact, laborng under
very heavy burdens just now. The Bank
of England keeps it's minimum rate OF
discount steadily maintained at per cent e,
a rate equivalent to a much higher one
in this country. So small Ia the popular
demand for investment at low rates that OF
the English Colonial bond issues brought
out in the last four years over Is per cent.
are said to remain unsold In underwriters
hands. The Transvaal loan Of $50 900 .0oc
il about coming upon the market. and
London County Council loan OF 5000, ooc
has Just been announced. Hanging over
France Is Government loan for the pur.
pose Of making good an enormous deficit
in the national finances. In Germany
money IL easier than In any other country
but only because general business is pros
trate. Russia is also borrowing all the
money she can get any one to lend her
and the funded debt issues OF all Of the grea'
nations Of Europe. with the single exception
Of italy. have recently heavily declined IL
price. In the case Of English consols the
drop has been sensational. While all thes'
necessities exist abroad, credit can hardly
be extended there on easy terms to Ameri
can or any other borrowers.
Looking over our own country we set
that the great NAV Of business and Of specu
Iation has swallowed the available none!
supply of the country and Is still unsatisfied
The billon-dollar corporations; the stupen
dous schemes Of industrial and railway con
aruction; the immense business Of the mer
| camille and commercial world; the grea
prosperity and development OF the Western
agricultural sections-all these focused Ii
a stock market already bending under tn
weight Of millions and millions Of dollars
worth Of bonds and stocks which have no
been sold and for which at the presen
time there Ia absolutely no market, d
not make for cheap money in the com
ing twelvemonth. The historical fact
that ever since Oct. I last. money ha
practically held at per cent. In this city
There was little fall In the rates after Ne'
Years, but the new capital creations and
bank loan expansion Of 5000 600 speedil
restored the old state Of affairs, and to-da
although these bank loans have been RI
duced more than one-half. they are sti
greater than deposits by 10000 900 and I'll
reduction has only been accomplished b
such loss Of cash and deposits that the ban
surplus shows comparatively little chang
II il reasonable to expect that after April
little easier tone in the money market ma
be. felt. But will the general situation b
materially altered? The Government
enlarging as much a. 1t can the cash ba
ance in It's vaults against the time Of tn
Panama Canal pa ymcnt. In June next come
the subscription to half Of the Pennsylvan
Railroad Company's SsO.OOo.ooo stock ise,
must be made. 1t being . practical oertaint.
moreover, that q large number OF bankin
houses who have been INDUCING In al
bit age transactions In the issue will tai