Except in one or two cases the banks reported a slight decrease in profits, but in every case dividends were maintained easily, and large amounts placed to published and unpublished reserves. One of the unusual features of the year was the fact that the rate for Treasury Bills was higher than the market rate for commercial bills; this was the outcome of the larger volume of the former and the smaller volume of the latter, coupled with greater competition for commercial bills, Continental banks being eager buyers of them throughout the year. The average rates for money in the past seven years are shown below :

DISCOUNT RATE (3 MONTHS' BILLS) AVERAGE.

6 80 5 4 3 2 12 9 | 2 14 2 39 3

4 2 3

8 3

BANKS' DEPOSIT RATE AVERAGE.

4 14 3

4 2 4

1 13 10 1 9 9 2 0 0 2 11 SHORT LOAN RATE AVERAGE.

6300

5 37 4 12 8 2 5 11 1 18 4 2 13 0 3 11 3

4 0 0

In the next table (p. 82) is shown the currency note position at the end of the past three years.

The actual maximum fiduciary issue in any year becomes the legal maximum fiduciary issue in the following year. The highest level of the fiduciary issue reached in 1926 was 246,011,006l., in the week ended May 13.

F

This figure is the legal maximum for 1927. The principal features of the Bank of England return are the substantial addition made to the stock of gold and the contraction of the note circulation. In the following table the figures for the past three years are compared :

The output of new capital issues was the largest for six years; this was partly due to the removal of the embargo on overseas loans in November, 1925. Emissions for the year amounted to 230,782,600l., an increase of 10,885,600l. Foreign and Colonial issues amounted to 101,606,900l., an increase of 13,808,9001. Features were the large number of corporation loans, raised partly for the purpose of paying for relief given during the strikes, the flotation of two more European construction loans, a Belgian Stabilisation loan of 7,250,000l. in Seven per Cents. issued at 94, and a Bulgarian Refugee loan of 1,750,000l., also in Seven per Cents., issued at 92. The latter was floated under the auspices of the League of Nations. A large amount was also issued for trust companies. Figures for the past three years are shown below:

The debts of local guardians of the poor were enormously increased during the year. The number of recipients of relief rose from 1,000,000 to 2,225,000, and on December 6, 1926, the loans and overdrafts of the Unions was 16,261,6997. against 9,296,750l. on March 31, 1926.

Foreign Exchange. Further progress towards normality was made by the foreign exchanges in 1926, Belgium returning to the gold standard in October, and Denmark following suit at the end of the year. Proposals were laid before the Brazilian Parliament for stabilising the milreis at 5-89d. gold. Sterling remained very steady, and in spite of the strikes. the New York rate at no time fell below gold export point. The Berlin rate, however, after being "unpegged "in August, fell low enough to make

5 paper francs. Prem.

it profitable to ship gold from London to Germany; this was largely due to that country's heavy borrowing in America and elsewhere. The French franc moved erratically: opening at 130 to the pound, it rose steadily until a level of 245f. was reached in July; with M. Poincaré regaining power, a strong recovery ensued, and the rate closed the year at about 120f. Italian exchanges moved somewhat similarly. The Oslo rate recovered to within measurable distance of par, and in Spain a marked improvement occurred in the exchange following the surrender of Abd-el-Krim in Morocco. Wide fluctuations occurred in the Athens, Bucharest, and Warsaw rates, but in each case there was little change on the year. A noteworthy event was the issue of the report of the Royal Commission on Indian Currency and Finance, which recommended that the rupee should be permanently stabilised at 1s. 6d. (around which level it was steady throughout the year), and that a gold bullion standard should be established, together with a new central reserve bank. The report recommended the reduction of the silver holdings of the Government of India held in the currency reserves, and this was partly responsible for a heavy decline (from over 31d. in January to under 25d. in December) in the price of silver. South American currencies were almost featureless save for a fall in the value of the milreis, which lost most of the ground recovered in 1925. The usual table of exchange rates, extracted from The Times Annual and Commercial Review, is given on previous page. In the next table are shown the New York quotations for foreign currencies:

The Stock Exchange.-When allowance is made for the effects of the General Strike and coal stoppage, the Stock Exchange may be said to have enjoyed a favourable year. The aggregate movement in securities was smaller than in 1925, if the calculations of the Bankers' Magazine be

taken as a representative guide. The 87 fixed interest stocks included in those calculations showed a rise in value of nearly 21,000,000l., or 0.5 per cent., to 4,096,456,000l. (against a fall of 155,000,000l. in 1925). Variable dividend securities, of which 278 are covered in the calculations, rose to 2,446,895,000l., an increase in value of nearly 58,000,000l., or 2.4 per cent.; of this increase, however, over 30,000,000l. occurred in eleven United States railroad shares, the British interest in which is much smaller than before the war. The aggregate value of the 365 securities was 1.2 per cent. higher at 6,543,351,000l. British funds showed practically no change on the year, the only important movement in the fixed interest class of security being a rise of 8.7 per cent. in foreign Government stocks, in spite of a heavy fall in Chinese bonds. Huge decreases in traffic receipts. notwithstanding, British railway Ordinary stocks showed a fall of only 0.3 per cent. The coal, iron, and steel group actually showed a rise of 9.3 per cent., but only fourteen shares are covered in this calculation. Other movements of importance were rises of 8.7 per cent. in electric lighting and power shares and 7.1 per cent. in South African mines, and falls of 15.1 per cent. in brewery stocks, 18-6 per cent. in rubber shares, and 55.5 per cent. in nitrate shares.

Foreign Commerce.-In the first four months the apparent adverse trade balance was reduced by 11,000,000l., but the General Strike and coal stoppage reversed this tendency, and for the whole year the adverse balance was 72,109,000l. higher at 465,406,000l. Owing partly to lower prices, but more to the strikes, the volume of trade fell from 2,248,133,000l. in 1925 to 2,020,322,000l. in 1926. Imports were valued at 1,242,863,6791., against 1,320,715,190l. in 1925, a decrease of 5.8 per cent. British exports were 121,488,1987. (15.7 per cent.) lower at 651,892,5041., and re-exports fell by 28,471,1667. (18.5 per cent.) to 125,565,6331. Imports of food, drink, and tobacco were 39,602,7591. (6.9 per cent.) lower at 530,498,2591., and there was a fall of 32,097,930l. (7.5 per cent.) to 392,685,2181. in imports of raw materials, but those of manufactured articles showed a fall of only 1.4 per cent. (4,657,8621.) at 314,973,2271. Exports of food, drink, and tobacco. declined by 4,520,6091. (8.2 per cent.) to 50,465.6871., exports of raw materials by 37,199,6121. (44-1 per cent.) to 47,151,025l., and those of manufactured articles by 78,428,5581. (12.7 per cent.) to 538,179,4801. The decrease in re-exports was evenly spread over food, drink, and tobacco, raw materials, and manufactured articles.

The Board of Trade calculated that the country had an unfavourable trade balance in 1926 of 12,000,000l., as compared with a favourable trade balance in 1925 of 54,000,000l., and of 86,000,000l. in 1924. The table is appended (see p. 86).

Coal and Iron.-The year was the most disastrous in the history of the coal industry. In the first four months of the year the industry worked. at a loss of about 1s. 41d. per ton, without allowing for capital charges, estimated at 3d. per ton. The strike lasted seven months, and resulted in a loss of output compared with 1925 of 123,000,000 tons, the output being 124,000,000 tons, or about one-half of that for the previous year. The loss in the foreign cargo export trade was about 28,000,000 tons. On