WELLINGTON NEWS

Hokitika Guardian, 14 August 1925, Page 4

WELLINGTON NEWS

LONDON MONEY. [ (Special to “Guardian”.) WELLINGTON, Aug. 12. Few, if any, of the newspapers have made referenee to the lowering el the Bank of England discount rate, and yet, according to a hanker, this is of considerable importance. He explains that the Bank of England is the hanker's hank and controls the London money market. On March sth. last the bank raised its discount rate from 4 to 5 per cent’. The 4 per cent, rate had been in force since July sth. 1923, and was therefore 20 months in operation. The higher rate was imposed because of a similar movement by the Federal Reserve Bank of Now York. The Bank of England was then t<> some extent tied to the American .restitution, and if the bank rate had no! been raised and money thereby made dearer in London than in New York, a good deal of American capital invested in London would have been withdrawn for re-investment in New York, and that would have necessitated the shipping of gold.' nt "till events it would have caused a serious disturbance. In April the British reverted to the gold standard, and many eminent economists were opposed to the movement. contending that the only course open to the Bank to protect the country's hoard of gold would he to raise the Bank rate. However, since then, instead of gold flowing out of the country as was thought probable, it h is been (lowing in. the gain representing over 8 millions sterling. Some of the gold liars been sent to the Bank of England for safe custody, and this is a great tribute t:> British hanking integrity, and in particular it displays a wonderful confidence in the Bank of England, which every hanker will say is fully justified. The fact that the Bank has seen lit to reduce the rate independently of what the Federal Reserve Bank of New York may do is proof positive that Loudon has regained some measure of it.-, prestige as the world’s financial centre. As already stated, the Bank of England controls the money market, and the reduction in the Bank rate means that I lie overdraft rate will he reduced relatively, and so also will the deposit rate. One can readily see that large industrial concerns borrowing £I Of :>•:;/) to £500,000 from hanks must benefit largely from this reduction. It means a big saving to them and tin; cheapening of money must give rise to confidence which is essential if trade and industry are to expand. If is thought that there may be a further reduction in the Bank rate to I per cent, in the course of two or three weeks, but the rule is not likely to go below that. Before the war. when trade and commerce were on a normal basis, ihe money market, usually displayed a hardening tendency after August, and the Bank rate generally advanced about the end of September or early in October. This was caused by heavy purchases by Europe of cereals and raw materials in the United States. Such purchases are of course now being made, hut the United States is extending credits to many European States, and tin’s will meet the situation. London's cheap money is not likely to he reflected in N.Z. or Australia just: vet. “NEXT YEAR COATES.” Some wag has christened the Prime Minister “Next Year” Coates because ho has expressed his sympathy with a good many reforms which will receive liis support “next year.” That next year is a good way off and there is a general election to he faced, and thnl is likely to rob Mr Coates of the priveleges of legislating “next year.” It is noticeable in nil his speeches that there is never a word of the Ooverument’s policy, perhaps he is afraid that the other fellow may seize the Prime Minister’s thunder. Speaking at Eketalmnn on Saturday he said: “I don’t propose to go into t ho future policy of the Government, but T can suv this: I hope its vision will attract round us all those r.enp'' who desire to see this r uintry great and progressive.” People are wondering what, this “vision” amounts to. It. is a ■nightmare like the Ooverninent’s visinn of lending at If per coot, the money it borrows at o per cent, and squealing about it in Parliament. Ihe Government has not the courage In face this problem which is a serious one for the taxpayers because of its “vision.’’ Then again, there is that tremendous loss on the Soldier (settlements which is another example of tlie Government's vision. Then, with respect to Agricultural Banking obliousiv the Government is side-step-ping the mailer hv sending a commission abroad to study the problem. This is another of the Prime Minister’s; “next year” stunts. Men capable of forming a judgment on the matter think that i( would have been preferable to have obtained the sen'ices ol an expert in Agricultural Hanking to see whether it can ho applied to New •Zealand. The trouble is that we have not a settled fanning population in New Zfulaiul, as there is in European countries, and it is tiiis shifting character that will make Agricultural Ranking a difficult problem. S ** 3sa,aK *^