The Press. MONDAY, JANUARY 26, 1914. THE PROSPECTS OF CHEAPER

Press, Volume L, Issue 14884, 26 January 1914, Page 6

The Press. MONDAY, JANUARY 26, 1914. THE PROSPECTS OF CHEAPER

MONEY. \ ' -It is usually dangerous torprophesy as to the future movements of. , the money market, because one never knows from what quarter a cloud may arise to obscure- the fairest prospects. Nevertho- •-• loss,-the omens-certainly seom to point at present to greater easo in the London ~ money market. Tho reduction of the Bank rate on Thursday last to 4 per cent, was no. doubt duly noted by busi- ' ness men, as also the rise which has taken place in gilt-edged securities. The table in our commercial column on . Saturday last showed a rise during the - past week of from 20s to 40s in Aus- ., tralian stocks, and of no less than 47s 6d in English, Consols. What has - brought the improved position most j clearly hofbro the general public, how'•errer, is the outstanding success of the recent Victorian loan of 4 per cent. , stock issued at 97* Instead of tho bulk . ,jof" tho issuo being left in the hands of the underwriters, as has been tho case iisrith so many colpnial issues of late, it was actually subscribed three times . jover. ■. Only applicants for £100. were allotted the fnll amount, other applicants being obliged to be content with So per cent, of the amount for which they applied. In connexion with this 'fact, however, wo must wkc into consideration the further Btatoment that a - erhdicate of "stags" applied heavily on - the strength of the New South Wales loan having gone at a .premium. As : students of the Stock . .Exchange are aware, /'stags" are persons who apply ■ '.tfor shares or stock which they do not intend to hold themselves, but which they; hope to sell at a profit to genuine investors "who may be unable to secure as largo an allotment as they desire. 'The statement that the' loan was oversubscribed threefold, therefore, does not necessarily mean that there were genuine investors willing to take three times the amount offered, but, nevertheless, tho loan was a most gratifying success, and its reception will give fresh hope to - other colonial Governments, our own included, who will find it necessary to apply to tho London money market at so distant date. •This, relaxation in the money market where extreme stringency has so long . jf- trailed has oomo about very euu•denly. So lato as October last tho 13ank rate was at 5 per cent, tho "Economist ,, took a gloomy view of the outlook, and hinted at tho possibility of an increasoto G per cent. It referred to the embarrassments caused by the Balkan troubles, the civil war m Mexico, the fclutrp in rubber, tho pressure of Canadian and Australasian loans, and other factors tending to make investors uneasy. Since- then the air has cleared considerably. Tho firm manner inwhich the syndicalists' strike in South Africa was suppressed will have had its .effect in restoring confidence. Wo fear, however, iho main reasou why money is likely to become cheaper is because tho trado boom is at an end, and tho «urve of prices, as Dr. Mcllwraith hinted in the interesting article wo .published on Wednesday last, is now • taking a downward direction. During a '• boom" manufacturers and others not only invest their profits in extending their operations in business, but are .

eager borrowers of capital for tho same purpose. Now that trade has become quieter, so far from wanting to borrow money, they are eeekinir good securities for the profits they have made. Other pprsons who havo made money during tho good times, are also beginning to look round for "something safe" to put it into, and as "Tii-3 Times" suggests, it is probible that insurance companies and others havo nu accumulation of funds which they want to place, and which they have delayed placing on account of the unsettled state of tho world. It has to be remembered, on the other hand, that there are a great many applications for capital which havo been held back, and these will no doubt come forward in a rush. Still, Sir Joseph Ward is perfectly right when he says there are very largo accumulations ol capital continually seeking investment in London. When, the demands brought about by active trade fall off, these must seek other channels, and the prices of good securities rise accordingly. We expect this result to follow in the present case. As Mr Massey points out in the interview in another column, tho rate of interest in New Zealand is dependent on the rate in England. Tho New Zealand Government has a large accumulation of short-dated debentures inherited from its predecessors to pay off this year, and tho easier conditions now prevailing will doubtless relievo Mr Allen's mind of a good deal of anxiety. There are also a number of local bodies in need of loans, but at present leaning on the banks, and if they can obtain what they want in London at a moderate rate of interest, the pressure,on the community at largo will.be considerably lightened. There is one fly in the ointment. If it is a trade depression which is giving us this cheaper money, it may mean that, unless new markets are opened up, we shall have to accept lower prices for our* wool, frozen meat, butter, .and other products. That is an aspect of the case on which we need not dwell now. The present relief in tho money market will' bo generally welcome, and it is too early yet to forecast the course of trade.