WELLINGTON NEWS

Hokitika Guardian, 4 November 1929, Page 3

WELLINGTON NEWS

LOCAL BODY LOANS. ; ,

(Special Correspondent )

AVELLINGTON, November 1

’llie Waimakariri River Trust is offering for sale debentures of Elo3 each, bearing interest at the rate of 51 per cent per annum. This is the only loan raised by the Trust on a district of a capital value of over £37,003,000, the debentures being secured by a special rate varying from one-twentieth to one-twenty-fourth of a penny in the £, this rate being levied on the capital value stated above. The gilt-edged ■ character of the investment will not be questioned, hut because it is gilt-edged it does not follow that the loan will be taken up readily. 'Hie rate of interest, ?>$ per cent, is not an attractive one, and it is,doubtful whether the State itself could raise much money at this rate, much less a river trust. Money is to-day dear and investors are naturally disposed to pick and choose but always they want the highest return it is possible to get. There are many other equally sound and safe gilt-edged securities besides the AA’aimakariri River Trust that offer bettei returns to the investor than the lattei, which must therefore suffer. It must be recognised that local bodies are restricted as to the interest. rate they, can pay on loans nor can they float their loads below .palv While .this. ,is to somevexterit a very useful legislative provision, there are occasions like the present when such hard and fast; rules inflict hardship on local bodies that must raise loans: Money is deal now, but it is not always going to Tie dear. Indeed, there is- every .probability that it will become very’ cheap a. vear Tirirfcei The ’ point is how are (the local bodies to tide over the period’ between dear money and cheap mdneyS; \ simple way would he to postpone borrowing until money becomes cheaper, but that would he hanging up works that are urgent. As matters stand now local body finance is rather troublesome. A way out of the difficulty would he for Parliament to empower Jocal bodies to issue hills for twelve months or at the most two vears, and offer them by public tender. Assuming that the AVaimakariri Trust is desirous of obtaining immediately sav £IO,OOO and : finds the monetary situation adverse to floating a loan at a low rate of interest, but feels that by waiting twelve months it can get the money fit a low rate, 'the Trust then invites tenders for twelve months hills for £lo,ooo' in-‘sums of £SO or | multipies thereof. Those who tender will state the ain on fit of tIV6 hills’ for which they are tbnderirig, ancl" the rate of interest. This’ being a short term issue would appeal to a very wide circle of investors, including hanks and insurance companies and various trustees. Before the hills mntpre the borrower can make arrangements for repayment either by’ renewing the bills for a fhrthem.twelve.months, if the circumstances make that, co.ursf advisable or a loan could he floated in the meanwhile and the bills paid off at maturity Local bodies should he granted power to issue hills when, as at present the conditions arefj unfavourable,; ter ; ssiiing local loans. AV ALL STREET CRASH. ’. Some months back, Sir Geo. Pifishe,. the "eminent economist; . and financier, 'predicted that there ..would shortly,be experienced a financial crash of some magnitude which he anticipated wopld be felt in the European spring. He was wrong as to the time, hut right,as to the severity of the crash. For making such an unwelcome prediction he was dealt with by many London newspapers who referred to him as a confirmed pessimist. The fact is that predictions olf such a character are resented by the democracy who prefer that one should say both in and out of season that everything in the garden is lovely. Recently Mr T. Shader AAeston, in his capacity as President of the Employers’ Federation, uttered some warnings which it was his duty to utter and for that he has been slanged by several newspapers. To return to Sir Geo. : Paislv, Ids' Prediction that, a .financial catastrophe' was pending- has been; fully justified by the unprece-. dented smash on the New York Stock Exchange. The losses have been enormous, and although a good deal of the losses have been in respect of paper profits still actual Tosses will run into billions and thousands will be affected. The position is rendered more danger- 1 : ous and difficuffit because of the fact that mass consumption in the great Republic has been stimulated by the instalment system, or as the Americans term it consumer credit. Almost everything purchaseable in America could be bought on time payment ancf now comes the question as to whether those payments can be maintained. It seems that America has gambled as it has never gambled before and staked its wonderful prosperity against loss. The time for taking a business inventory of the mortality as the result of, the financial crash has yet to he made, but it is axiomatic that the world will suffer with America. The last big crash was in the autumn of 1907 and the wave did not heat on to New Zea-/ land until the winter of 1908 whenl there were soup kitchens about, espeeiallv in AVellington. Tt would he pessimism to predict that the same thing will happen again.