THE MONEY MARKET.

Press, Volume L, Issue 14885, 27 January 1914, Page 8

THE MONEY MARKET.

« SHORT-DATED AND LONG-DATED LOANS. STATEMENT BY MINISTER OF FINANCE. (special to "the press.") DUNEDIN, January 26. Last week the Leader of the Opposition, while in Wellington, gave a reporter his views on the easing of the Homo money market arid the success of recent short-dated loans. When this matter was brought under the notice of the Minister of Finance in Dimedin tcPnight, the Hon. Mr Allen had something to say in reply. "It is perfectly true," said Mr lUlen, "that there is a very considerable improvemont" in the London money market, but nothing like to tho extent that some people think. It must be recollected that tho last Victorian 4 per cent, loan, though it was over subscribed by tho public, was floated at a very low price indeed—£97 —and it was quite sufficiently tempting "to the public to make them subscribe heavily for it .with the certainty that they would make a profit out of it in a few days. However, I am pleased to see that there is an improvement in the money market. I sincerely trust it will continue, but I see no prospect for some time to come at any_ rate, of our being able to float a loan in London at a lower rate of interest than 4 per cent. I believe there are very large demands yet to come on" the London moneymarket. It is not much use, however, to speculate on tho London prices. The market varies from time to time, and wo must do our best with it-as we find it. * - . "Sir Joseph Ward has dealt with the principle of short-dated loans as .opposed to long-dated loans. Of course, there are degrees of short-dated loans, nnd it may be expedient sometimes to take a comparatively short-dated loan, though I doubt very much indeed /whether it will ever pay us. But there can be no two opinions as .to the folly of New Zealand entering into shortdated loans which run for two, or four, or five years. Indeed, with ten year loans one will have to calculate tho whole cost' of renewal every ten years, including underwriters' fees, brokerage, bank charges, and various other charges, before one can make any comparison between it and a longer-dated .loan which has only to meet those charges once in 30, or 40 years. With the short-dated loans, however, such as the late Governments committed us to for four and two years, tho absolute folly of them must be apparent to anybody. Such loans do not got into the hands of the legitimate investor—they Co into tho hands of the speculator who is looking for what he can make out of the underwriting fees as often as ho can get them. These people are not prepared to renew loans; they insist on Now Zealand going through all the cost of refloating. That is what is happening with respect to the last two loans. Two years ago the Government paid underwriting fees, brokers' fees, bank fees, stamp duty, and other bank charges, and those samo charges have all to bo paid over again now. And it is the same story with regard to the four year loan. Add to this the difficult position it places the Government in which has to borrow to repay these loans in one year, and in the same year borrow for its usual annual requirements. The cost of the two year and four year loans, including sufficient to redeem the discounts, is very much heavier than in the case of tho loan floated last February."