New-York tribune., 1912-02-17
CHEAP CONSOLS
Partisan PIeas-GosChen's Mis-
OBSERVATION-DISCLOSURES.
London. February

y, ~ worn threadbare by paruSdnS. "Ine
,,o,lv Mail" has been seeking TO establish
,so decline of national credit under
I,ovd Georgeism by showing that there
49,. been a shrinkage of c 100 100000 in
,,-,,i,b gilt edged stocks and that this
-,or,nous loss has been accompanied by
o,An greater depreciation In the values
:, houses and land and of brewery
sbares. 1t seems to have the bank presi-
so,,ts with il when they are writing off
,,,,oense sums year by year in conse-
o,ence OF the decline of consols and
thor national securities, and Mr. w. r
rewson has come to it's aid by making a
.,,,1ent attack upon the Chancellor's
oneecb on current government eXpendi-
.',res The editors of the two important
Aroncial reviews, THE Economist and
.arbe Statist," are both Radicals and ad-
,r,irers of Mr. Lloyd George, and they do
,ot support these sweeping structures on
-,vernment finance. They know, and so
does every practical financier not OBJ
sessed by political partisanship, that the
danreciation OF national securities Is
mainly due to the low rate of interest
For many decades consols were con-
-s,dered a barometer for testing the
nressure of the worlds confidence in IN
ysstments. This was before 1888. when
they carried 8 per cent For hl'een
wears after that date the interest was
0s. and then ii was reduced to n per
cent. The so-called barometer mas De-
oon,e another instrument, with an al
tered graduated scale: and comparisons
,ritb oldtime values and conditions can
NOT he made with accuracy. COnsols at
Oh interest can now he bought at ''12
IN the open market, this being equlVa-
lent 10 % for 3 per cent stock. IL
cannot be doubted that change OF rate
eror, 216 TO 8 per cent would at once
Gerry them to par and possibly above II.
r,o eurnIus of investments entering
into destructive competition Win con-
soils has sent them down point by point
until the present low level mas oeeh
reacbed when there is hardly a cloud
anywhere in the European sky, ana
when national industries are well en-
Moved and the aggregates Of foreign
trade. exports and imports, were never
larger. In 1889. when the reduction OF
interest began on Consols. the area Vi
trustee investments was wldened py
legislation. and four years afterward ana
again in 1900 there We're supplementary
acts in the same direction. The Chan-
cAilor has explained the effect in the
,ucid statement that whereas trustees
had 1900 600 900 to choose from outside
government securities before 1893 they
now have SOO.OOO.OOO at home and
abroad: and the returns from these in
vestments are invariably larger than
from consols.
There was a large increase OF the
national debt during the Boer war, ana
the Wyndham land purchase scheme IN
Ireland has involved fresh issues; but
there have also been generous contr1ou-
tions to the sinking funds, and If ex-
penditures for the navy, pensions and
social reforms have run up heavily the
annual budgets have been balanced ana
there have been no accumulauons OF
floating Indebtedness. Partisans, in ac-
counting for the depression of consois'
are as unscientific as medieval water
finders with their witch hazel dlvininS
rods Lord Goschen's miscalculation
cannot be undone in hurry Consols at
1ls per cent have lost their attractive
ROVER when more remuneratlVe invest
ments can be made with adequate Sc
crritv The municipalities, Colonial
Governments and foreign corporations
have been borrowing money on large
scale. and not only trustees, but horde
Of small investors have been placing
capital where good returns can be re-
ceived. Consequently, while consols have
fallen year after year since the Boer
war. capital has yielded a more gen
erous and trustworthy tribute in legiti-
mate investments at home, in the colo
MES and in foreign countries. Nor does
there appear to be any probability OF
any Chancelors arresting this process
when consols carry 212 per cent and
large masses of money are wanted al
nome and abroad at higher rates of in
terest.
The Daily News" has been publishing
proposals and arguments for the restora-
ton of consols TO their oldtime dignity
in the stock lists. There are hundred
and one projects, but not one of them
meets the primary difficulty Of making
212 per cent as attractive as ), or .,
when trustees have a wide choice OF
securities and the increased cost OF Nv
ing forces small investors to take larger
risks and to get as much for their money
as possible Partisans in the mean time
find it easy TO impo. upon the credulity
of the public in their efforts to hold the
government responsible for the decline
Of consols and for the impairment OF
British credit. There is, indeed, as much
MISREPRESENTATION and failacious reason
a. about the depreciation Of public
3fedit to-day as there was in 1913, when
politicians were convinced that the bank
charter act was operating mischievously
and that the government of the day was
accountable for the arrangements OF
commercial confidence and the continu.
ance of monetary pressure. The Liberia
ministers have heavily reduced the ma
tional debt and enormously increased
current expenditures. and the Chancellor
cannot hold out any hope Of retrench
ment unless an arrangement can be ef
fected with Germany for the reduction
Of ornaments A rise of consols at ~
cannot be reasonably anticipated wher
f200,OO0,000 budget is rapidly ap
preaching. and neither political party il