Optimism on Stock Exchange – New Issues – Gold Policy of the Bank of Italy – The Population Problem

«The Economist», 15 dicembre 1928, pp. 1110-1111

Turin, December 5, 1928

As a sequel to the big American post-election boom there has developed here a boomlet, originating with the Fiat shares. As the New York price of the Fiat bonds with warrant – i.e., with the right of conversion into a certain number of shares – was very much higher than the Turin price, sometimes as much as 150 lire per share higher, numerous purchases from American sources began, and more were talked of. The price of Fiat shares, which at December 31, 1927, was 390 lire, and hovered up to August of the present year between 385 and 438, slowly increased to 463 at September 29th, to 506 at October 27th and suddenly jumped up to spectacular heights in November, touching 693 at November 24th, and even surpassing the 700-lire level. To-day it is about 635. Some other international securities followed suit; between October 27th and November 24th the Chatillon Silk Company (artificial silk) rose from 236 to 285 (to-day 273), the Montecatini (chemical fertilisers) from 279 to 303 (today 296.50), the Pirelli (rubber cables, &c.) from 833 to 850 (today 925). The influence exercised by such rises on the general trend of Bourse affairs and prices was, however, moderate; between October 27th and November 24th the bank shares index number rose from 108.33 to 111.95, navigation and transports from 80.92 to 81.19, textiles from 43.22 to 46.46, minerals, iron and steel and engineering from 90.71 to 104.40, electrical from 102.14 to 103.45, agricultural and real estate from 80.90 to 81.11, food and miscellaneous from 91.82 to 97.58, and the general index from 86.20 to 90.43. This present level may be deemed low or high, according to the date selected for comparison. It is much higher than the bottom of 57.63 touched June 25, 1927, and certainly less than the basis level 100, which relates to December, 1925.

The only prudent conclusion to be drawn from the above is that there is afloat an optimistic tendency in the Italian stock exchanges, which is a potent factor in easing new issues of joint-stock shares and bonds. The compilers of the monthly bulletin of the Banca Commerciale Italiana have made a very interesting review of the official figures of new investments, increases of capital, winding-up, and capital reductions, and have reached the conclusion that in the first ten months of 1928 the savings asked for by the joint-stock companies share issues have been 3,000 million lire, more than three times the amount asked for in the corresponding months of 1927. Only 500 out of 3,000 millions were drawn from repayments of capital or proceeds of winding up of old companies. The rest was fresh money. In addition, there were issued in the first ten months of 1927 bonds for 865 million lire, against 415 for the whole 1927.

The problem of the preference to be given to the gold-exchange or gold-bullion system is not discussed in Italy at present; but it may be interesting to give a few figures about Bank of Italy reserve (in millions of lire):

There is a continuous decrease of foreign gold credits, presumably commercial bills purchased at New York or London or current gold deposits in the same places. Foreign Treasury bills are preferred as an investment of sums held in foreign countries, presumably in view of their higher net yield. But the most important feature is the increase of the gold held in cash. At present the foreign exchanges are kept within the statutory gold points by purchases and sales of foreign bills; but, as in France, it seems to be the policy of the Bank of Italy gradually so to increase the gold reserve as to be able ultimately to maintain exchanges at par by the use of bullion only, independently of any foreign bills reserve.

The population problem is always in the forefront of public discussion. Much attention has been attracted by a computation which purported to show the decrease between 1877-86 and 1920-23 of new-born babies in proportion to women between 15 and 45 years. The average decrease in nativity was for the whole kingdom 19.38 per cent. Only one region, Southern Calabria, can boast of an increase, of 4.20 per cent. Other southern or central regions show moderate decreases: 0.16 per cent, for Basilicata, 1.42 per cent, for Umbria, 5.51 per cent, for Campania, 6.73 per cent. for Puglie, 7.85 for Abruzzi, 7.89 for Marche. But even Sicily shows a decrease of 29 per cent.; and in only one northern region, the Venetian provinces, is the decrease moderate (5.95 per cent.). Elsewhere the decreases are formidable: 24.85 for Tuscany, 30.77 for Lombardy, 42.76 for Ligurian provinces, and, worst of all, 47.20 for Piedmont. In the last regions the French two-babies custom is rapidly spreading. In a trenchant article the organ of the Premier, the Popolo d’ltalia, accused the big cities of being responsible for the decrease of the birth-rate. Already last year a royal Decree forbade the erection of new factories in cities of more than 100,000 inhabitants. A Bill was brought yesterday before the Chamber of Deputies, which gives to the Prefects – the representatives of the Government in the provinces – very wide powers in opposing the increase of population in the big cities. When workers are to be dismissed the first to go are ex-rural men; unemployed men are to be sent back to their rural homes. Labour offices must be opened in all provinces, and they must give preference to city-born men. Peasants must be discouraged in every possible way from immigrating into cities. Ruralisation is deemed the necessary condition of waste-lands reclamation and of the increase of agricultural production.