Evening star., 1947-08-03
london Stocks Break
As Government Stops
Supporting Bonds
: By Tom WiIIioms
.Asseeioted Press Finoneiol Writer

By Tom Williams
Assoeioted Press Finoneiol Writer
LONDON, Aug. 1.-The Britisl
government got out of the stocl
market this week. removing tn
official prop under governmen
securities and share prices droppe,
In one of the markets most sensa
tlonal breaks in years.
Conservative estimates figure tn
loss In market values on the Lon
don Exchange in more than a weel
at more than half a billion pound
1.-TWO billion dollars.
So severe was the break tina
analysts speculated in the posi-
bility that minimum prices woul,
be imposed for all British govern
ment securities dealt in on tn
exchange. a..
The effect of such action perhap
would freeze" the market in gov
ernment bonds for the time being
People could not sell unless Their
was somebody ready to buy at tn,
legal minimum.
Such a freezing" measure wa,
adopted during the war, but a
much lower prices.
Economic Chaos Feared.
Immediately behind the break II
prices was what appeared to be a
least temporary abandonment O
the governments cheap money
plan.
But looming large was the spectr,
Of economic chaos in dollar-shor
debt-ridden Britain.
Market recovery on a substantial
scale, one highly placed source VIII,
declined to be quoted directly said
depends upon what Prime Ministe
Attlee says in the Commons debat,
on the economic crisis next week.
Observers regarded 1t as highl,
probable that heads of the Labo
government would not be mucl
concerned with the losses of wealth,
investors and professional specula.
tors in the market.
But wnat he has In mind re.
mained the secret Of bald, iowa
Hugh Dalton, Chancellor of tn,
Exchequer.
In removing official support, some
market sources said, Mr.. Dalton wa,
trying to mop up surplus spendine
power.
Since the Labor government came
into power two years ago, Mr.. Dal.
ton has been proud of his, chear
money policy, of the fact that ht
could force interest rates down from
5 per cent and borrow for the gov.
ernment at the rate of ~ per cent
Looked Good on Surface.
II government issues failed to sell
tney were underwritten by the Ma.
tional Debt Commissioner who ha,
behind him the vast sterling re.
sources OF Great Britain. When the
price was right, the commissions,
would sell the securities he had
underwritten.
Using these tactics, Mr.. Dalton
managed to refund maturing issues
trustees, prohibited by law from
investing in speculative issues. con-
Verted. Others, with q big backlog
OF war earnings and no place to
spend them, also bought the bonds
On October 28, 1916, Mr., Dalton
refunded f42e ,o00, 900 ($1, ,716, 900 0oO)
worth OF 3 per cent local loan,
bonds with an issue of s480 600 O0o
81 $40, ,ooo, ,00o)s at "a per cent (par
f100-$400). >T"A
on the surface. one highly placed
financial source said, the issi1e
looked pretty successful" =
But" he added, "the National
Debt Commissioner probably held
great deal Of the local loan issue y
The az per cent issue with the
uncertain maturity date of 1878 or
after, has since gained the name
among brokers Of "Dalton's 2h
irredeemables." s7
Lower Than Two Years Aro
IN general, prices of government
securities dipped lower than thev
were TWO years ago when the Labor
government took Office. The inter-
est rate, as a result, rose to SLIGHTLY
more than three per cent.
The sell-off of Government sec,,r-
ltles found sympathetic reaction in
all other sections of the market with
lnduStrialS AMONG fba b,,,,-I
losers. 'Aes'
Professional covering late FRIDAY
accounted for a rally that boosted
government issues as much as 40
1or the day and erased a fraction
OF the losses in other lists.
Inc market will be closed until
iuesoay CMonday is a bank holi-
oay), close Of the current account
period. sooii'
Comparing this weeks break with
tne slump OF May, 1910, "the econ
omlst," well informed weekly said
the atmosphere has reflected be-
wilderment and a sense of crisis ~
The fact that the authorities
nave been forced into acouescent
retreat with the maket," the paper
ADDED, throws some doubt on the
ehances OF stabilizing the gilt-edeed
iist even on a per cent basis. but
the balance Of possibilities suggests
IIlaI tnls Will become the new datum
levei. three per cent is widely ac-
sspCeo as a reasonable limit to which
cneap money should be driven. The
chancellor over-reached himself
wltn 2h per cent treasury, and he
Is now reaping the consequences. !"
Chicago Grain
ahead hdiCinGo. infno ~ Aus 2 P.-corn rolled