The Debt Charge – Banking Deposits -Stock Market Depression

«The Economist», 31 dicembre 1921, pp. 1157-1158

Turin, December 24

From the vast mine of the appendices to the Budget speech, which have been circulated only today, it is possible to add various interesting facts to my last letter. The figures of the annual charge on the public debt are as follows:

The sum inscribed under the head of external debt is only figurative, as the interest is accumulating from year to year on the debts towards Great Britain and United States. If these debts were to be repaid, their repayment would absorb a great deal more in paper money, as the 972 millions for 1920-1921 and 1,100 millions for 1922-1923 are in gold lire.

Deposits in banks (issue and ordinary) and in savings banks are increasing, as the following figures show:

The middle of 1915 was the moment of maximum panic and of reduced deposits. But thereafter deposits went on increasing year after year. It may, however, be observed that deposits have only increased about 3 1/2 times, as compared with the pre-war figure, whereas the purchasing power of the lira is only one-fifth of what it was before the war. If deposits had multiplied in the same ratio as the lira depreciated, the sum total of deposits should have increased to about 38 billion lire, instead of to 26. But we have to reflect that, upon a total sum of 26.6 billion lire of deposits at June 30, 1921, upward of 21.7 billions were savings deposits and 4.8 current accounts. In Italy only these last are truly banking deposits of the trading and financial classes. The savings deposits are derived from the middle, employee, and working classes, and are apt to reflect the pinch of high cost of living. As this cost has risen from 100 in 1913 to about 500 in 1921, it is interesting to find that these classes have maintained a sufficient margin for saving. It is also interesting to observe that the greater volume of deposits is not accumulated in the ordinary or issue banks, but in co-operative or public banks. Only 6,609 million lire are deposited with the issue and ordinary banks, 20 billions being under the patronage of the co-operative and public banks. This is an element of stability in the financial situation of Italy. In the last two weeks we have heard much of disastrous results of some giant companies, such as the well-known Ansaldo and Ilva iron and steel concerns. Shareholders’ meetings were summoned to hear a story of capital wholly or almost wholly dissipated. Share quotations dwindled, to the despair of unfortunate holders. Much loose talk was heard about the consequences of the winding-up of concerns of such magnitude on the creditor banks; and a consortium was formed, under the Bank of Italy’s guidance, for guaranteeing the Banca Italiana di Sconto, which, however solid, was known to the public as the Ansaldo’s patron, against the peril of a rush by depositors. Amid all these rumours, the foundations of Italian credit remain unshaken, as depositors of popular and savings banks are sure that their savings are invested by their old-fashioned institutions in acquiring bills of the surest description and moderate amount, and securities gradually written down to current prices. The stock exchanges are, however, closing the year in a very pessimistic temper, as they are feeling acutely the influence of the bad news relating to Ansaldo and Ilva companies. The public which has bought these iron and steel shares at 300 lire and upward and sees them today quoted at 45 and 16 lire, with a downward tendency, is shy of the share market.