It is this expression "Consolidated Fund" that has been abbreviated into "Consols."

As to the history of Consols, it is probably sufficient to go back for a period of twenty years, when the greater portion of the Debt consisted of what was then a 3 per cent stock. Mr Childers in 1884, as Chancellor of the Exchequer, offered the holders of the 3 per cents in exchange for each £100 of stock, either £108 of new 2 1/2 per cent stock, or £102 of new 2 3/4 per cent stock, - both stocks being irredeemable till 1905, when they could be redeemed at the option of the Government. Contrary to expectation, Mr Childers' offer was accepted by only a small proportion of the holders of the 3 per cents, - 19 1/4 millions of the new 2 1/2 per cents being applied for, and 4 1/2 millions of the new 2 3/4 per cents. (You will see that the 2 1/2 per cents stand in the List at £31,000,000, the extra £12,000,000 having been previously created by Mr Gladstone in 1853.)

The 3 per cents were not again interfered with by Government till 1888, when Lord Goschen (then Mr Goschen) adopted a more effective method of bringing pressure to bear on the holders of the 3 per cents. Instead of giving the alternative of taking a new stock or retaining the present holding, he gave the alternative of taking a new stock or repayment in cash. The new stock which he offered carried interest at the rate of 2 3/4 until 5th April 1903, when the rate of interest was to be reduced to 2 1/2 per cent. The stock was not to be redeemable till 5th April 1923; but on and after that date it could be redeemed at par by Parliament on such notice, at such time or times, and in such order and manner as Parliament might direct.

Mr Goschen, being a practical financier, succeeded in effecting the conversion where Mr Childers, and previously Mr Gladstone, had failed. In the first place, he did not confuse the public by offering them two classes of stocks for their holdings of Consols. Mr Childers had fallen into this mistake, and made the matter worse by placing before them a somewhat difficult problem - namely, that of deciding which was the better bargain of the two options; whereas Mr Goschen offered an equal amount of the new stock for the old, or redemption in cash. In the second place, Mr Goschen interested the banking and stockbroking world by offering a small commission on the amount which they should send in for conversion; and in the third place, he made the stock attractive to the same classes by consolidating the whole of the 3 per cents into one large stock, which, though bearing a lower rate of interest, would be more marketable than the old debt, split up as it was into different classes. As a result of his plan the proportion of stock unconverted was small. Holders representing less than 19 millions refused the offer and applied for payment in cash. The success of the scheme was doubtless due to the fact that a considerable portion of the stock was held by trustees who, in many cases, had no power to invest in any security but Consols; and doubtless many others had the power, but could not face the responsibility of finding new investments for their trust-funds.

It is interesting to compare the return on Consols with the return on the National Debts of some of the principal foreign Powers. The last price of Consols in 1903 was 88 per cent, the return at this price being £2, 16s. l0d. per cent. At the same date the following were the prices of, and the relative returns yielded by, the following stocks in the foreign markets: -

The very low rate of interest on the United States Bonds is caused by artificial conditions. The banks there, which receive State deposits from the Secretary of the Treasury, must lodge Government bonds as security; and Government bonds have also to be deposited with the Treasury as the basis of the note issue of the National Banks. The banks, therefore, must buy a sufficient quantity of Government bonds to enable them to carry on business; and as the amount of the bonds is being constantly reduced through the redemption of the debt the price has been artificially raised, and the rate of interest lowered in consequence. The Russian securities, on the other hand, were depressed in consequence of the possibility of war with Japan; but the depression at the end of the year had not had much effect, as the highest price in 1903 was 103 1/2 and the return thereon £3, 17s. 3d. per cent.1

The price of Consols has in its time undergone great fluctuations. Those in the last ten years have been very considerable, though small compared with the rise and fall in the last hundred years. 'The Times' recently gave an extract from 'The Times' of 1803, quoting 56 as the last price for the day of 3 per cent Consols. This was equivalent to something like 47 for a 2 1/2 per cent stock as at present: so we see that though the price of Consols is depressed it is nearly double what it was one hundred years ago. The highest price Consols have touched was 113 7/8 in 1896 (you will remember that the stock then bore 2 3/4

1 It has to be kept in view that this was written before the outbreak of the Russo-Japanese war.

per cent, reducible to 2 1/2 per cent in 1903), and its lowest point, since the accession of Queen Victoria in 1837 up to the end of 1903, was 86 7/8.

It is well to note the causes which led to these maximum and minimum quotations. To take the maximum in the first place, there were special reasons for the high prices. It is estimated that the annual average savings of the nation amount to about £160,000,000. Now, investments either in this or in other countries have to be found for these savings. If there is a ready outlet the rate of interest will tend to rise. If, on the other hand, there is a difficulty in obtaining investments the rate of interest will fall. Now, in the 'Nineties trade was depressed partly on account of the uncertainty of the European political situation, and partly on account of the collapse in South American securities caused by the Baring crisis; and with a depressed trade the supply of new investments in this country was insufficient to meet the demand. From similar causes the amount of money placed in foreign securities had been considerably reduced. The combination of depressed trade in this country, and want of confidence in foreign credit, resulted in a dearth of investments for the savings of the country, and consequently there was a great appreciation in all classes of securities.