WELLINGTON NEWS

Hokitika Guardian, 8 March 1932, Page 6

WELLINGTON NEWS

BRITAIN’S CREDIT. (From our own Correspondent). ' WELLINGTON, March 7. . In July, August and September of last year gold was flowing out of England in a steady stream because other nations', and particularly Continental nations, had lost confidence in sterling, and “The Times” (London) called attention to tlie fact in a scathing article. To stem this outflow of gold' the Bank of England and the British Treasury, both borrowed heavily in Parish and New York. The Bank of England secured credit for £IOO millions, half in Paris and halfin New York, and the British Government obtained £4O millions, half in Paris and half in New York. The Bank of England paid some time back, the last £30,000,000 being paid early this year in gold, which was made, possible by the heavy receipts of the nietal from India, This gesture was viewed in. a favourable light by other countries, and the release of the Bank from this liability enabled the Bank to reduce its rate by 1 per cent. The loan raised by the British Treasury was on a different basis. Half of the £2O millions raised in Paris was obtained on short termed credit and the balance was secured by the sale to the French public of RLD Treasury Bills with a currency of one year. The New York portion was raised through the J. P. Morgan Company and associated banking houses and was also obtained on British'Treasury Bills with a currency of one year. Thus it will be seen that these bills do not mature until. August 28, or about five months hence. Notwithstanding this the British Treasury has repaid £3O millions out of the £4O millions and would no doubt like to pay off the balance, but as the bills for the balance are | in private hands they cannot be retired without the prior consent of the liold-

The British Treasury's determination to make the payment five months in advance of maturity has surprised Wall Street, which interprets it as another ' striking instance of Britain’s recovery. The payments were made on Friday last. There are not the only demonstrations that foreign nations have had that Britain is far from being decrepid, nor was she “down and out” as some foreigners Were supposed to believe. Before many weeks pass we will be treated to many more thrills and demonstrations of Britain’s rejuvenation. The British financial .year closes at the end of the month and it is already known that there will be a surplus. The “Morning Post” asserts that a Budget surplus of at least £10,000,000 is now assured. Britain will thus be the first and only nation to have balanced its Budget and to have a surplus. „ The Chancellor of the Exchequer will no doubt use the surplus for reducing the income tax, and some time ago it was suggested that the reduction would be at least 6d in 'the £. This in the aggregate will amount to several millions which will be available for expenditure within the country. Besides repaying these large credits, loans have been made to other countries. Thus Uganda raised a loan oi £2 millions in London earl.y in the year, and last week a 4.) per'cent, loan £2 millions placed on the market T>y Nyassaland was rushed and over-subscribed in an hour. These are all indications of a splendid recovery, and 'the recovery is bound to gain 'inomentnin.

It is very probable that money will be further cheapened in London, and it would not be surprising if, liv the first week in May, the Bank Rate is down to 3)-% and even less. Such cheapening of money would be an invitation to the British Government to stage a big conversion issue, and if this is put .through it would mean „ a further s aving to the tax-pavers. But <!l this would not mean that the depression has ended, but it does mean that Britain will be in a''better position than any other nation wfion the depression begins to disappear. The fundamental causes of the depression have yet to be removed, and the itindamental causes are reparations, war debts and tariffs. But these 'troublesome affairs must soon be dealt with. the British tariff must force high protection countries to reconsider their policies.