Manawatu Herald. TUESDAY, AUGUST 28, 1894. Colonial Consols.

Manawatu Herald, 28 August 1894, Page 2

Manawatu Herald. TUESDAY, AUGUST 28, 1894. Colonial Consols.

■ r i -#T~ T To encourage the hoarding of money the Colonial Consols scheme of the Government may turn out a success, but the greater use made of this privilege the greater will be the downfall of their other pet cry of cheap money for the use of settlers. The working of this business is easily to be seen. When banks give a good rate of interest on deposits trade suffers and speculation dulls as the thrifty prefer the security of the bank at a certain rate of interest to the. risk of a commercial venture even at a much higher rate of interest. It ip thus an always welcomed event when banks reduce their rates, as it not only shows money is plentiful and the banks aie sound, 'but it forces the stored up capital 1 into channels which help to open up and develope the trade of the colony. Without a particularly clear grasp of the ? position the Government are proposing two schemes which must work in direct opposition to the other. Cheap money to the farmers is, at present, impossible . for the Government to supply, the strength of the colony being unequal to the strain. The scheme may give some farmers cheap money,

those of the right " colour " or those who will repent of their sina and become of the right " colour," but it is impossible that many can benefit. In the Budget the Treasurer proposes raising one and a half millions of pounds per annum at 3£ per cent and lending it out at 5 per cent. If he succeeds in doing this he displaces money already lent, which if 11 foreign " money, may leave the colony altogether leaving us so much the poorer of capital, or if " local " money would drive it into other channels. This would not be unsatisfactory did it go to local industries but then this is where the two proposals clash. The Treasurer we will say succeeds in driving out capital invested at six per cent to the amount of hia loan a year, will that money go into trade ? is there any other investment as safe as land to hand ? Yes, the Treasurer provides it in Colonial Consols, " put your money into these at four per cent " he practically tells the capitalists " and your worry will be at an end." The farmer gains little or nothing, simply the one per eenfc interest per annum which will be more than swallowed in the discharge of the old mortgage and entering into a new one, but the wicked, private moneylender will lose two per cent per annum, and the Government will gain the use of this money for public purposes. It appears to be as round about a way of helping your friends as could be conceived, but a neat way obtaining a loan under a new name. Supposing that the Government are not successful in floating this yearly loan, the chancea of the farmer getting dear money instead of cheap money appears most probable. Tho private capitalist has put his money into consols where after his treatment in land he will most probably retain it, so the percentage must rise to the borrower. Just at the present time whilst the banks are displaying their independence about cash the tendency of the Government proposals may be to cheapen money, but it is surely within the experience of all that the banks directly they find their deposits leaving for more interest paying risks, will very soon raise their rates and stop the remainder going. So, directly the Consols are available a great deal of the money now in tho banks will be diverted from them to the Consols and should such a process not suit the banks up will go the interest, and the fact that the banks give large interest, causes, as it must be admitted by all, a stagnation in -trade and a general tightening of the money market. To counteract all these motives the Colonial Treasurer places his paltry million and a half 1 it is on a par with attempting to bale the Manawatu river out with a pannikin, and would be absurd were it not that the country settler is likely to be the sufferer. All this paraphernalia to nominally save the farmer one per cent interest, to cause the thrifty to lose two per cent interest, and practically to harden money to the borrower all round, more especially those connected with trade. Of such are the Liberal Government.