WAR FINANCE

Dominion, Volume 10, Issue 2957, 21 December 1916, Page 6

WAR FINANCE

THE POWER OF BRITISH MONEY. Lecturing ■on tlio power of Uiilish money recently at the' Manchester University, Mr. Drumniond Frasor described how the chief problem of the war finance had been solved, and said tihafc the steadiness of the American exchange proved the ability ot this country to meet tho excess cut of ito capital resources. The Mobilisation schemes for the sale and loan of dollar securities had been one of tho irost remarkable financial feats of the waT. After urging the necessity of reducing the importation of all essential goods, Mr. Fraser said that towards the 3400 millions sterling spent duiing the last two and a quarter years, a sua of 757 millions had been received from the revenue, leaving 2,600 millions to he raised by borrowing. Less trn« onethird was raised by the firstond second War Loans, and ovor two-thirds by continuous day-by-day borrowing, cF which the outstanding Treasury bills'anounted to over £1,000,000,000. The amount required between now and the end of the current financial year exceeded £600,000,000, a sum which could be raised by the 6 per cent. Exchequer bonds, the daily applications for which were infinitely to be peferrcd to another spectacular loan. In ordinary normal times the springs of the people were estimated to an.ount to £400,000,000 a year. Ithad also been estimated that a reduction of tie expenditure on luxuries by tho well-to-do classes would amount to another 400 millions yearly. These two together for the two and a quarter years were equal to 1,800 millions. Mr. Fraser svgaested that the balance of £300,0011,000 had. been raised by tho enormously incieased circulating capital caused by the Government's daily purchases, fcbich enriched trade, reduced stocks, and quickened sales. So there had been little or no inflation of bank credit cr tie currency in connection with tho raising of the huge sums borrowed for the prosecution of tho war. The rate rf 6 per cent, of the Exchequer bonds should be a warning to everyone to reduce consumption. The increased taxation and the higher range of prices having failed to produce a voluntary avoidance of all superfluous consumption, it was to be hoped that this higher rate of interest would not only have the power todrai* money from abroad, but to draw it out of the pockets of the people, and thereby transfer the purchasing power of the individual to the Government. 1 If this failed to reduce the consumption of the civilian population the Government would not bo able to r,et the goods and services required for the Army and Navy, and would bo driven to niako a levy on every income to force upon the people a lower standard of living.