WELLINGTON NEWS

Hokitika Guardian, 22 October 1931, Page 6

WELLINGTON NEWS

dearer money. (Special Correspondent). WELLINGTON, .October 20. The Federal Reserve Bank of New York raised the discount rate on Thursday of last week from 2J per cent, to 3 per cent. ; a week previously the rate was raised from li per cent. The present rate is the highest since May 1, 1930, for a 31- per cent, rate was in force from March 13 to May 1. The reason advanced for raising the rate was to check the outflow of gold. This can hardly ■be .accepted as the true reason for a few .weeks ago tile gold holding in the United States was said to be £I,OOO millions, or about half the world’s monetary gold, but if the United States lost half its hording of gold it would not hurt. There must be other reasons. We know that the revenue of the country has been sinking. For the fiscal year ended June 30 last there was a Budget deficit approximating £2OO millions, and in the first quarter of the current financial year, that -is to the end of September, the expenditure exceeded the revenue by £IOO millions. America is a very rich country, and even such a rich country cannot stand up to such heavy deficits. America must -spend huge sums in providing for the. unemployed and unemployment is increasing in that country. Another factor troubling the United States .is that the exports are shrinking. In August the imports exceeded the exports -by "£200,00.0 - for., the first time for years. There, are, many reasons for the hardening of money rates in the United States besides the . efflux-..0f gold. The French discount rate was raised from 2 per cent: to 2,V per cent, on October 9, and France is the cheapest money market in the world to-day, but •that i(t of nq. benefit to the world, ...for. borrowing in the Paris market is neither easy or convenient. The French peasantry, who find most of the money, aost heavily through Russian repudiation, and they lost again when the franc was devalued front lOd to about 21 per cent. Tt is very difficult to borrow in France, and when a loan, is arranged the terms generally involve spending the whole or the greater portion of the money in France, which is not always convenient. The Bank of England discount rate was raised from 44 per cent, to 6 per cent, on Sunday, September 20, and the folio wing day Britain slid off the gold: standard, fl'he Bank is still meeting outside commitments of a legitimate character in gold, and this seems obvious for the holding of the Bank is ■increasing very slowly. The German Bunk rate was increased to 15 per- cent, during the crisis which forced President Hoover to declaring a moratorium on war debts. This rate was subsequently reduced to 10 per cent., and on September 9 it was further reduced to 8 per cent, which rate is still in force. It is generally agreed that liberal banking policies everywhere will he’p to stimulate business courage ar.d enterprise, but confidence once shrten is not .-easily restored. It is perhaps an irißTcatibn • <JT r:: B isorileF ‘-‘in wortd : ’fiiiafi cethat the discount rates in Paris should be 2.V per cent., in New York 31 per cent., an London 6 per, cent, and in Berlin 8- per - cent." These difference?; Mould not exist if polit’es and social agitation could be eliminated and ordinary business relations allowed to rule. The gold standard, states an authority, has nothing to do with thi.s, except "that the gold basis for" Currency affords a ready . means ,of trknsferi.'ing cap’tu 1 from countries which have it in abundance to countries whore it -is. needed, thus promoting the general state of world welfare, but the same facilities can be used to withdraw capital if the lenders or investors are moved to such action.