WELLINGTON NEWS

Hokitika Guardian, 28 October 1931, Page 2

WELLINGTON NEWS

FEAR PSYCHOLOGY. (Special Correspondent). WELLINGTON, October 25. The world-wide depression which began to manifest itself in the second half of 1929 was ushered in by the rapid decline in commodity values, most of j which dropped to the pre-war level or below it. Now it seems to have spread to finance for we find that eminent economist, .Sir Walter Layton Editor of the ''Fcononiirt” (London/, pointing out that the fact that hardly a country in iKurope where foreign exchange can be freely bought and sold is evident of a spreading paralysis, in international commerce. These widespread difficulties, ho maintains, are caused by a psychological depression which is p.ti'.ly responsible for the pessimistic view taken in the United States, and In; adds ■ "There is no need to expect a crash of the dollar." ht This is rather significant and alarming. In the United States there is lying in the vaults more than half of the world's munetaiy gold. The note issue of the country has a full hacking of gold. It is true that recently therewas a heavy withdrawal of gold which caused the Federal Reserve Rank of Now York to' raise the rediscount rate from 2.1 per cent, to 51 per cent., but all this does not warrant the pessimism that is said to he prevalent in New York. This arises partly from fear psychology, but whatever the cause it will Ultimately prove of benefit to the world, for a chastened United States will be more ready to abandon its selfish policy of splendid isolation. It seems that the crisis which hi might

into being a Nat otiai Government in England is still full of dynamite. A national financial crisis is cxactiv the same as any other crisis. Conditions grow increasingly grave until there comes a point at which tin; patient must either quickly succumb or take a turn tor the better. England's failure to retain the prominent position in world trade and. finance which she held prior to the war was because she had been hard hit 4>v the world’s new-horn nut oualisni with its striving for self-sufficiency by means of tariffs, bounties and restrictions; that other nations ,'fiere either gaining upon her or had passed her, and apparently she has been living in the past on capital accumulated in the past. The present crisis in England grew out of her reparations with Germany, for white not exceeding tier scope as a commercial hanker she provided Germany with large short-term credits, and these due to the levent financial d flienltios iri which that country found itself, and

suddenly became frozen. There might have been no trouble under ordinary circumstances, but the circumstances were far from ordinary and a world already suffering from a lack of confidence became increasingly fearful. I here was, as we know, a run on the Bank oi England which ultimately forced Britain off the gold standard. The United States and France readily came to the assistance of England and lent her vest sums of money’ but not from kindness ol heart or any .sentimental reason;. But this financial assistance is .merely i >i.;.;i-g.ip. ■ - ’''“'l out under tlr* pressure w( „ iwre- - I y. All

this can he ascribed to the world-wide policy of procrastination wish it had been followed during the past two years. Germaiiv trembles on the brink ol Bolshevism and she is "sided over" for a Few months. The war debt moratorium runs vear when it is obvious that here . s a question which should he settled once and for all. There ha- been fit ’k- alteration in the fundamental position ol Br'tain, but the Steps already tak-n have been courageous. By abandoning the gold standa.M Brii iin has caused financial d sturbanccs and repercussions practically throughout the world. As one American financier observed recently: "Anything which hurt'-' London's financial operations hurt's us. We need her brokerage facilities unimpaired. Yew York, for example, cramped with a tariff, could never hope to replace old London in t.h ; s regard." Raids and New York, notwithstanding their enormous gold holdings, are gripped with fear psychology. To remedy the situation they must co-operate to restore London to her predominant padtion as the world’s commercial banker.