§ Before leaving the subject of the National Debt, the Committee will expect me to say something about Consols and their fall. Much has been said and written with regard to the fall in Consols, and in some minds, apparently, there exists apprehension and even dismay at what they allege to be the great fall in the credit of the country. No doubt the fall has been very great, but before I come to the conclusion of the observations I have to make on this important subject, I hope that the Committee will agree with me that there is no reason for either apprehension or alarm. The fall has undoubtedly been very great, but both the high price which was reached by Consols at one time and the low price which they have touched lately have undoubtedly been abnormal, because of the peculiar circumstances of the time, both at the one period and at the other. The Committee will remember that in the year 1890 there was a great financial crisis. Confidence was much disturbed and shaken, and people in the City hardly knew from one day to another what might be expected to occur. The consequence was that all the financial houses in the City and elsewhere fortified themselves to meet any great demand that might be made upon them. And how did they make provision for meeting any demand that might arise? They made it by adding money to their tills, by taking care that they had large supplies of ready money. And how were they to obtain those large supplies of ready money? By the sale of securities. And the securities which are, I would almost say alone readily saleable at such a time as we saw in 1890 are Consols. Consols were very largely sold by all the financial houses in the City and elsewhere, in order to strengthen their position, and the money was added to the available balance which it was thought prudent on the part of those houses, to have ready for any sudden demand which might be made upon them. The consequence was that Consols, which were already below par, 241 fell several points, and it must be remembered that at that time the interest was not 2½ as now, but 2¾ per cent. A period of cheap money followed some time the crisis. There was a rapid output of gold in South Africa and American money, owing to the silver panic in the United States, poured into the British market for investment. The Bank rate for some years stood as low as 2 per cent., but even that did not represent adequately the low price of money at that time, because; although the rate of discount in the Bank was 2 per cent., everyone who had anything to do with the City at that time knows that discounts could be obtained readily at considerably below the Bank minimum, and that, in point of fact, day to day money was often lent as low as ¾ per cent., and even ½ per cent. Trade was not active, the Money Market was deluged with money, and the natural consequence was that people who found they could make a good profit by buying consols which yielded to them 2¾ per cent. and borrowing money from their bankers for which they had to pay ½ to ¾ per cent., went in largely for that profitable transaction. In addition to these causes which operated to raise the price of Consols again, the Government became a large buyer of Consols because of the growth of the Savings Banks deposits, which always increase largely when money is very cheap, but do not grow so largely when money is very dear. We had, as the Committee knows, to borrow at one time a good deal of money in connection with the redemption of Consols. When that operation ceased, more money was available, and so the Government added to the money which was in the market. All these circumstances created a great demand for Consols, while the supply of the material became shorter and shorter, with the inevitable result that Consols were forced up abnormally high. Then succeeded a period of great trade activity. Money was wanted; it became dear; and down went Consols again. The South African War ensued, expenditure increased, Government became large borrowers, the Sinking Fund was suspended, less money was paid into the Savings Banks, less gold came from South Africa; and another cause which operated, I think, was that people did not quite realise how soon Consols were 242 to come down from 27¾ to 2½ per cent. The category of Trust securities was enlarged; colonies and municipalities came into the market to borrow, and what wonder, then, that Consols had fallen, and fallen materially? To sum up the situation; we have during the last twelve or thirteen years been through two distinct periods; one of extraordinarily cheap money, so cheap that we were able to borrow twelve months Treasury Bills at the rate of interest of 13s. 9d. per cent. per annum—the other a period of extraordinarily dear money, so dear that we had to pay as much as £4 17s. 5d. per cent. per annum for six months bills. The cheapness and dearness of money would in any case have produced a marked rise and an equally marked fall in Consols; but the cheapness and dearness were both attended with exceptional circumstances which made the rise and fall more marked. When people talk of a record depression, and compare the price of Consols now with the price in 1870, they are not comparing like with like. They seem to forget that the stock is now of a different denomination. It was 3 per cent. in 1870; it is 2½ per cent. now. It is, therefore, clear that a simple comparison between the prices of Consols in the two epochs gives no index of the comparative credit of the country then and now. Let us examine for a moment what is the equation of the two stocks both quoted at 91. With Consols at the price of £91 in 1870, the yield was nearly £3 6s. per cent. Now, at the same price, it is only £2 15s. So that the investor who in 1870 paid £91 to obtain an annual dividend of £3 would now pay £109 4s for the same annuity. That is I to say, that, if we ignore the fact that a stock above par is naturally depressed by the prospect of ultimate redemption, and if we suppose that the Three per Cent. Consols existed now, they would stand at over £109, or 20 per cent. higher than in 1870. Yet people, in the, face of figures like these, are apprehensive as to the credit of the country.