Prices – Sugar Beet and Wine – Bank and Liquidations

«The Economist», 27 agosto 1932, p. 393

Turin, August 15

Even before the Stock Exchanges were closed for the holidays business was very quiet, with no sign of revival. Optimistic prophecies from the United States are greeted hopefully, but wholesale prices continue to fall, going down in the first week of August to 78.7 per cent, of the pre-war level. Hindrances to international trade are bearing their evil fruits: during the first half of 1932 goods carried by sea to and from Italy decreased by 7.65 per cent. Gods carried by railways decreased from 48,615,000 tons in the fiscal year 1930-31 to 40,404,000 tons in 1931-32. Recent agreements between Italy and France increasing the very limited import quotas are therefore welcomed as a sign of possible relaxation.

The rainy spring and summer months, while reducing the wheat yield, promise an abundant beet crop, poor in sugar content, so the associations of beet growers and of sugar makers have agreed to increase by 15 per cent, the quantity of beet which must be purchased by sugar makers. The rest will be used as cattle food. As the alcoholic content of this year’s vintage threatens to be low, it was decreed in the last Cabinet Council that the minimum alcoholic degree required from red wines on sale shall be raised from 9 to 10 per cent., and that from white wines from 8 to 9 per cent. It is hoped that many low-content wines will be withdrawn from direct consumption to distillery.

The campaign for the collection of gold has brought the Bank of Italy’s reserve from 5,627.9 million lire on March 31 to 5,700.4 on July 31. During the same period the gold exchange reserve decreased from 1,533.6 to 1,390.2 million lire. As, however, the note circulation decreased from 13,871.6 to 13,492.3 million lire, the percentage of the gold cover to circulating notes increased from 40.57 to 43.49 per cent. More interesting, perhaps, are the changes in the discount and advances items from 5,637.9 million lire on March 31 to 6,819.3 on May 31, and 5,974.6 on June 10 and 5,685 millions on July 31. At the same time advances from the Bank to the Liquidations Institute increased by degrees from 1,613.1 million lire on March 31 to 1,789.5 on July 20. This figure ought to have decreased instead at some intermediate date by 800 million lire, which the State Exchequer paid to the Institute to enable it to reduce its debt to the Bank of Italy. The inference is that the reduction has taken place, but at the same date, probably after May 31, the Bank of Italy transferred an equivalent sum from the discount item to the debt of the Institute. Frozen assets remain thus at the same level; and in banking circles the opinion is current that this is not the end of the process of the liquidation of past inflationist errors. Other frozen assets or losses must be transferred from banking and others concerned to the Bank of Italy, and thence to the Liquidations Institute to be amortised in time with State Exchequer or special fiscal grants. The miracle is that so gigantic a process of liquidation, which amounts already to 5 or 6 billion lire, has been carried out without increasing or even with a gradual decrease of the note circulation. It may be said that notes should have decreased even more, or that the process has been possible only through the successful issue of Exchequer bonds; but at all events the winding-up process has gone on, and still continues, successfully, without dislocating the foreign exchanges. In its turn, the stability of the lira has reacted on public psychology, stopping or reducing the export of capital and even provoking not a few capitalists to recall balances formerly held in foreign countries.