If prices had reached a higher level the story of 1922 would have been much brighter. As it was, frozen credits were melted to some extent, but at the close of the year there were still many outstanding. Some of the credits were melted by an issue of capital, usually in the form of debentures, which enabled companies to pay off their debts to banks and others. They were in part transferred to the public. But, as we pointed out last year would be the case, the failure of prices to rise converted many of these frozen credits into bad debts pure and simple. The banks helped their customers as much as possible, in order to reduce their own losses. But as it was bad debts were numerous. There were no fewer than 7,636 failures in the United Kingdom, an increase of 1,996 on those for 1921. The total for 1921 was 3,354 more than in 1920. For the two years 1921 and 1922, the failures totalled 13,276, whereas for 1919 and 1920 the total was only 3,361. This heavy casualty list testifies to the severity of the economic storm which swept over the country in these two years. The increase in failures did not cause surprise. We pointed out last year that as trade tended to revive failures would tend to increase, since those who were in difficulties could be nursed until prices had touched bottom, and then if there was no prospect of recovery they would have to go to the wall.

The economic disorganisation on the Continent was again very acute during the year, and though here and there progress was reported, there was little revival of buying power. Towards the end of the year there were signs of a slight improvement in trade. The Economist's analysis of industrial profits, made quarterly, clearly revealed the course of events. In the first quarter of 1922, 442 companies reported net profits of 26,785,9521., a decrease of 20,582,9741., or 43-4 per cent.; in the second quarter 401 companies reported profits of 25,195,6907., a decrease of 12,849,100l., or 33.7 per cent.; in the third quarter 209 companies reported profits of 12,120,153l., a decrease of 3,733,7671., or 23.5 per cent. ; while in the fourth quarter 319 companies reported profits of 24,228,7197., an increase of 918,2871., or 3.9 per cent. The total profits of the 1,371 companies amounted to 88,330,514l., a decrease of 36,247,5741., or 29 per cent. for the year. Of the total profits of 88,330,514l., the sum of 67,946,5801. was distributed in ordinary dividends, and 23,893,2047. in preference dividends. The total profits were equal to 7 per cent. on the total ordinary and preference capital combined.

The year 1922 was a notable period in the history of national finance, because it witnessed the first effective effort in economy and a reduction in taxation for the first time since the war began. The Budget year ending March 31, 1922, closed with a surplus of 45,693,000l., against a final estimate of 56,129,000l. Revenue amounted to 1,124,880,000l., a decrease on the Budget estimate of 91,770,000l., and a decrease on 1920-21 of 301,105,000l. Expenditure amounted to 1,079,187,000l., a decrease on the estimate of 81,334,000l. and a decrease on 1920-21 of 116,241,000l. The surplus for 1920-21 was 230,557,000l. Customs yielded 130,052,000l., a decrease of 3,951,000l. ; excise 194,291,000l., a decrease of 5,491,000l.; motor duties 11,096,000l., an increase of 4,023,000l.; estate duties 52,191,000l., an increase of 4,462,000l.; income tax 398,887,000l., an increase of 4,721,000l.; excess profits duty 30,452,000l., a decrease of 188,729,000l. ;

corporation profits tax 17,516,000l., an increase of 16,866,000l.; post, telegraphs, and telephones 56,400,000l., an increase of 6,900,000l.; and miscellaneous receipts, from sale of surplus stores, etc., 170,806,000l., a decrease of 117,134,000l. On the expenditure side permanent debt interest absorbed 24,500,000l., the same as in 1920-21; war debt interest 307,794,000l., a decrease of 17,304,000l.; and supply services 719,307,000l., a decrease of 98,074,000l. On March 31, 1922, the floating debt amounted to 1,029,520,500l., a decrease on the year of 245,809,500l. On December 31, 1922, this debt had been further reduced to 941,051,500l., the amount of Treasury Bills outstanding being 719,040,000l., against 882,219,000l. on March 31, 1922, and 1,120,841,000l. on March 31, 1921.

The Budget for 1922-23 showed a considerable deflation on both sides of the national balance sheet-due, of course, to the reports of the Economy Committee recommending cuts amounting to about 170,000,000l. Only a portion of the cuts proposed were adopted, and Sir Robert Horne, in what proved to be his second and last Budget, estimated a total revenue of 910,569,000l. Thus a surplus of 706,000l. was shown. The expenditure figure allowed of one-half year's interest on the American debt, payable in October and November, 1922, and amounting to approximately 25,000,000l.; and 25,000,000l. as a provision for Supplementary Estimates. The reduction in expenditure enabled the Chancellor to reduce taxation, but only by raiding all the sinking funds for the redemption of debt, the obligatory repayments of debt included. The remissions of taxation took the form of a reduction of 18. in the standard rate of income-tax, reducing the figure to 58., lower postal and telephone charges, the minimum charge for letters being reduced from 2d. to lid., and the lowering of the duties on tea, coffee, chicory, and cocoa, the reductions being as follows: on tea from 1s. per lb. to 8d. per lb. ; on coffee from 21. 2s. to 1l. 8s. per cwt.; on chicory from 17. 19s. 8d. to 1l. 6s. 6d. per cwt.; and on cocoa from 21. 2s. to 11. 8s. per. cwt.

The total national debt on April 1, 1921, was 7,634,148,3321.; on April 1, 1922, 7,742,526,1471.; and on December 31, 1922, 7,835,000,000l. Interesting changes took place in the composition of the internal debt. In the six months ended October 1, 1922, the total of the internal debt, exclusive of the floating debt, was increased from 5,666,675,000l. to 5,756,302,000l., owing chiefly to conversion of short term into long term stock, and by sales of Treasury bonds in replacement of Treasury bills. But though the capital of the debt was increased by 189,637,000l. the interest charge was reduced by 892,000l. per annum.

In consequence of trade slackness the Treasury was again able to dominate the money market. The fall in money rates which began in 1921 continued in 1922. Bank Rate was reduced four times-on each occasion by per cent. On February 16, it was lowered from 5 to 4 per cent.; on April 13, to 4 per cent. ; on June 15, to 3 per cent. ; and on July 13, to 3 per cent. At the weekly tender sale on Fridays the average rate of discount at which Treasury bills were sold proved to be 21. 11s. per cent., against 4l. 11s. 6d. in 1921, in which year the tender system was in operation just over eight months. The highest rate in 1922 was 31. 13s. 10.73d. and the lowest 11. 138. 6·41d. Early in the year the Treasury abandoned the plan of selling Treasury Bonds at a fixed

price, and resorted to sale by tender, the bonds being offered at the same time as Treasury bills. Of course the Treasury obtained gradually improving terms for its bonds. At the beginning of the year it offered 5 per cent. Treasury Bonds, then 5 per cent. Treasury Bonds, and finally 4 per cent. Treasury Bonds. These sales realised a total of 289,745,000l., Net sales of savings certificates amounted to 58,133,000l., against 11,380,000l., despite the fact that on April 1, the price of the certificates was raised from 15s. 6d. to 16s. Subjoined is our usual table of money rates:

DISCOUNT RATE (3 Months' Bills) Average.

5 4 3 4 16 2 3 11 9 3 18 10 1 6 8 0 5 4 3

| 212 9

4 12 8

4 8 3

BANKS' DEPOSIT RATE AVERAGE. 3 14 4 4 0 0 3 1 3 3 3 10 4 14 3 | SHORT LOAN RATE AVERAGE. 356 397 4 10 0

The annual report of the London Bankers' Clearing House for 1922 showed a moderate recovery in the turnover of money, owing mainly to the financial activity in the first half of the year, and to the improvement in trade in the last few months. The total of bills, cheques, etc., cleared was 37,161,461,000l., or 2,230,902,000l. more than in 1921. This increase is equal to 6.3 per cent. But the total shows a decrease of 1,857,442,000l., equal to 4.8 per cent., as compared with the record total of 1920. The figures are are as follows:

The increase is all and more than accounted for in the town clearing, both the metropolitan and country clearings showing decreases. Several factors contributed to produce this increase. New issues were on a somewhat larger scale than in 1921, the total being 573,675,600l., an increase of 184,697,4001. over the figures for 1921. The operations on the Stock Exchange were slightly on the upgrade, and the higher values ruling there involved a larger turnover, while foreign exchange transactions called for the passing of very considerable sums. Increase

of real trade cannot be regarded as a factor, as any such increase was offset by the lower range of wholesale prices prevailing. The recovery in trade was merely reflected in a diminishing ratio of decreases in the last months of the year in the metropolitan and country clearings. One new "record was created during the year; clearings in the week ended April 4 amounted to the unprecedented figure of 960,408,000l. The figures of the New York Clearing House for the twelve months ended November 30 show a total turnover of approximately 43,545,434,000l., an increase of 3,603,806,000l. as compared with the preceding twelve months, equal to a little over 9 per cent. Mr. R. Holland Martin's report on the operations of the London Clearing House contained some interesting figures, showing the extent to which the cheque has supplanted legal tender in business transactions in this country. The late Lord Avebury, in September, 1865, stated that out of 1,000,000l. paid into his bank, only 2.7 per cent. consisted of bank notes and coin. Statistics taken in 1922 at banks in the City showed that the percentage was less than 0.7 per cent.

The totals of the ten provincial clearings for the year 1922 were as follows:

In the subjoined table is shown the currency note position at the close of the three years, 1922, 1921, and 1920:—

The note circulation of the Bank of England also diminished, owing, of course, to the fall in prices and the depression in trade. The figures for the three years are shown on next page.