WELLINGTON NEWS

Hokitika Guardian, 28 July 1931, Page 5

WELLINGTON NEWS

MONEY PROSPECTS. (Special Correspondent.) WELLINGTON, Jmly 27. The raising of the Bank of England j minimum discount rate from 2.1 per | cent, to 31 per cent., added to the I obviously unsatisfactory outcome of ] the Seven. Power Conference in London on German finance, is calculated to cause •disturbance' to the economic conditions which, a month ago, before President Hoover sprung his moratorium plan ou a surprised world, seemed likely to continue favourable. . Tlie Bank of Engand’s gold reserve was augmented week after week, and at July 1 stand at. the record sum of ■£164,619,030', and the prospects were mi favourable that the London, money market expected accretions that would bring the gold holding of the Bank up to £175,090.000, when money would have been regarded as a “drug in the market.” But since then matters have moved rapidly and adversely. The suclidennes:) of President Hoover’s moratorium served to focus attention on the financial straits of Germany, which was alleged to be in a virtual state of bankruptcy, France, who knows Germany and Gorman psychology, rather intimately, did not fall for President Hoover’s moratorium, but fortunately, after protracted negotiations between the United States and France, an agreement. was reached by which Germany I has been relieved of paying repar** ! ations epmliiionai and unconditional for a year, and the amount not,paid is to ba covered by annuities extending over tolr years from July 1, 1932. Tims payments op accounts .of war debts is suspended all’round, lir.it tire Union of South Africa bag decided not to take advantage of the moratorium and will pay to the United Kingdom as usual. So far as the problem of reparations and, war debts is concerned that can be said to have been solved for the time being, but the question of Germany's financial condition has not-been adequately dealt with. Up to the time ol writing all that appears to have been done is that the Centra] Banks which advanced Germany £20,000,000 for three weeks have extended the time period to three months, and in the meantime three eminent bankers are to assist with advice the Reichsbank. This money poultice is not strong enough, to do the good that is needed, it will simply relieve for a very limited period .the financial agonies of Germany. At one 'period the United States willingness to join with 'European countries in providing Germany with a 'short term loan of £60,000.000. Instead of affording the stricken country with the substantial monetary aid suggested she has been put off with a three months’ acceptance. It was not surprising therefore to learn that the. German people have relapsed into a- state of pessimism, there being a feeling that the London results are inadequate, also serious alarm at the shortage of money, The London .Conference must be written down ns a failure, and the failure is largely due to the intervention, of international polities* The economies of the world have been rendered unstable and uncertain, which is hound to demoralise"' national' commerce. Instead of improving the position President Hoover’s offer of a moratorium has rendered the situation more difficult. The offer of a moratorium was not due to any ultruism on the part of the American Government, but a political gesture in preparation for the Presidential election next year. The sum total of the past month’s negotiations and cogitations by the Powers is the raising of money rates which will tend to further restrict in ternationel trade, resulting probably in a further fall in the price level. The nations m desperate financial straits, like Germany and Russia, will seek to obtain foreign funds by dumping raw materials and manufactured goods regardless of cost, and this will prolong tlie price slump. There is! no immediate prospect of money'' cheapening in Europe, on the confhny it is more ikely 'to advance, for the “usual autumn demands will soon make themselves felt. A praiseworthy effort has been made by our Government to’ 1 lower the price of money 'within the Dominion, but in view of tlie altered conditions much success is not to be* expected. New adjustments and alignments must follow and that is where the shoe will pinch. If Great Britain aml the United States had tlie handling of the German problem better results would have accrued, hut France could not view the matter except through political spectacles and the result is very disappointing.