Stock Exchanges – Bank of Italy – Foreign Trade – Treasury Bonds and Amortisation Fund – Wheat Prices

«The Economist», 30 novembre 1929, p. 1022

Turin, November 26

The New York slump had no appreciable influence on Italian stock exchanges. Since the middle of 1925 our bourses have been in a sleepy mood, transactions being limited to the professional operators, with no participation at all by the public. The index number of 35 representative securities calculated by the Milan Economic Council on a basis of 100 for December 31, 1925, had gone down to 62.61 on December 31, 1926, recovering to 80.25 on December 31, 1927, and to 88.29 on December 29, 1928. The present year opened hopefully with a spurt of 90.21 at the end of February; but soon after lethargy was resumed, with a fall to 81.68 at the end of April, a short recovery to 86.87 at the end of August, followed by a new decrease to 84.68 at the end of September. At October 31st, notwithstanding the American crisis, the index was 85.72, with a recession to 84.62 at November 16th. Transactions have lately been limited to a proportion in the neighborhood of 3.46 per cent, of the total number of shares issued.

The Bank of Italy has not changed the official rate of discount, which was raised from 6 to 7 per cent, on March 14, 1929. The policy must be considered in connection with the movement of the most important items in the balance sheet (in million lire):

The rise in the official rate of discount last March was clearly a move against the constant efflux of gold which had continued since March 31, 1928. The aim was not achieved at once; but after the end of June a reversal of the current set in; so that at the end of October the reserve had risen by almost 300 million lire. This favourable movement is related to a similar reversal of the foreign trade situation (in million lire):

The good wheat yield of the 1929 harvest is mainly responsible for the falling off in total imports. On the other side exports would have been better if the motorcar industry were better able to meet competition in foreign markets, only 17,719 cars being sold in the first eight months of the year against 19,120 in the same period of last year. On the whole, however, the general industrial situation seems to be improving, exports realising the hopes entertained during the months when imports of raw materials were rising and made inroads on the gold reserve of the Bank of Italy.

A very important statement was made by the Finance Minister, signor Mosconi, at the Cabinet of November 14th. There are extant at present 7,640 million lire of Treasury nine-year bonds, which fall due between November 15, 1931, and November 15, 1934. The Minister most solemnly declared that the bonds will not be forcibly converted into perpetual rentes, as was done in November, 1926, in the case of short Treasury Bills and three to seven-year bonds. They will be duly reimbursed at the fixed date. This declaration was in some circles interpreted as tantamount not only, as the Minister hinted, to the future offer of a new redeemable security against bonds falling due, but also to the issue of ordinary Treasury Bills, which, after the compulsory 1926 conversion, were no more heard of in Italy. It is always good for the Treasury to be able to issue Treasury Bills. In the past year the Treasury has relied mainly on the deposits of public administrations, especially of the great Deposit and Loan State Bank, and of the Bank of Naples, which deposited on September 30, 1929, 2,925 million lire in the public treasury. But these banks will have to use their deposits, as big plans concerning land reclamation, afforestation, etc., are eagerly awaiting additional capital.

Another interesting statement by Signor Mosconi is that the Public Internal Debt Amortisation Fund is to be reformed. It seems that the system of crediting the budget surpluses to the fund will be discontinued. Budget surpluses, under our system of accounting, are not always cash surpluses, and become available only after the winding up of all accounts relating to the year, often a long process. Probably a fixed sum will be put down in the budget as a contribution to the Amortisation Fund.

At the last meeting of the Wheat Committee Signor Acerbo, Minister of Agriculture, moved that the present wheat duty of 140 gold lire, viz., 520 paper lire, be maintained and possibly changed if necessary to meet excessive depreciation of wheat prices in the world markets; that facilities should be granted for the temporary export of national wheat, when prices are too low in the Italian markets in comparison with foreign markets, and that means be sought for the building of elevators and for relieving the farmers from the dire necessity of selling crops immediately after harvest. Present wheat price are somewhat better than 1,300 lire per ton, but farmers complain that, notwithstanding the 140 gold lire duty, which is almost double the duty of 75 lire prevailing in 1914, prices are lower, if account is taken of the changed purchasing power of money, than those current in prewar years, a situation unfavourable to the wheat campaign.