The Taihape Daily Times AND WAIMARINO ADVOCATE. TUESDAY, APRIL 20, 1920. A TIGHTENING MONEY MARKET.

Taihape Daily Times, Volume XI, Issue 3465, 20 April 1920, Page 4

The Taihape Daily Times AND WAIMARINO ADVOCATE.

TUESDAY, APRIL 20, 1920. A TIGHTENING MONEY MARKET.

With which is incorporated “The Taihape Post and Waimarino News.” ~,

[ It is notified that the bank rate of ' interest in Britain has been increased to 7 .per cent, and it is quite underLtandable that people in British Domlinions, where money earns a lower rate of interest, will be looking to know how the change is going to at‘fect them. Money like most other 'things will find its way to where it is in greatest demand, therefore, iflit is -justifiable to send butter, wool, meat, hides and all other primary products }, into thatmarket that offers the biggest price, it is also reasonable for capitalists. to invest their hoax-dings where the highest rate of interest is offering. Whether‘ the inducement to withdraw money from investment in New Zealand and send_i-t for investment where interest_ is nominally higher, remains to be seen‘, but so long as banks are content to charge the old rate of. 6 per cent. there is flsure to be such an increasing volume of Iborrowing which can only operate .towards .a rapid reconciliation of interests throughout the Empire. Plentitude of nioney has not produced the results anticipated; it has not led to proportionate increase of production, -and were it not for special legislation to urge and force on a greater volume of primary, textile and fictile produc-3 tion frustration of natural supply and demand by artificial supply and deg pmand would have gone to more dis-j [aster fraught limits than it has done. ; [Limitation of output and cornering of: merchandise created such a demand 3 that manufacturers discovered there-!‘ in a means of becoming millionaires in only one or two years, ‘and they are 10-th to relinquish their new found Aladdin’s lamp. How urgently Bri-I tain needs money is reflected in the |Bndget speech delivered in the House [of Commons yesterday. Britain's fiestiinated expenditure is 279 millions {above that of other; normal years and six times greater than in any pre-war times. The result of an orgy oi.‘ profiteering is also being reflected in the Budget speech, for it predicted that a super-tax will be levied‘ on incomes, { ‘and that a graduated tax will be plac- I ied on profits to replace the excess! iprofits tax, and in‘ addition death! duties are being increased. It is ap- ‘ parent that utmost care is being taken ‘to avoid increasing taxation that could ‘only result in increased clamour for ‘higher wages. Government is evidently noting that multi-millionaires ‘are not conducive to a contented, 5 prosperous Empire. There is no patriotism ahont money; it would go to Turkey, Timbuctoo, or any other place to escape taxation if it could. It will not be overlooked that although there is intention. to super-tax incomes and levy a graduated tax on profits, capitalists are being allowed to pass a portion, at least, of the tar? on to the ‘people in the rate of interest on borrowed money beingraised to 7 per cent. It is the old indirect taxation‘ fiend operating in another fashion. Government is— levying something from capitalists and iscompensating them by allowing them to charge in-I creased interest Whether taken as= a, Commodity, or as something opposed ; to commodities money in capitalist ~ hands never misses earning a profit 1 whichever way it moves; it earns in- < terest when‘ invested, and if it is tax- A ed the rate of interest is’ increa'sed as‘ 1 compensation." The tax on ‘capital is 1 passed on to the «borrower in the ex- :

action of higher rateshf. interest, in trnuch the same way that prices of taxed, or cornered, commodities inlcrease; whether it be nfoney_, tea, .'sugar- or clothing reaction produces ‘like results, and the burden, however much increased, is passed on from iniillionaires to borrowers and continiues to go down till it reaches the {masses of the people, who have nobody and nowhere to pass it on to. Naturally, an inflated currency is accompanied with a decrease in comlmodity values, but these are not ordinary’ times, and nobody can guess even what will happen. If New Zeala.nd banks do not increase their lending rates of interest there will be a tendency for Dominion capital to flow Londonward; if they do there should be proportionate decrease in the cost" of living. It is not, stated howvthe tightening of money is likely-to affect commodity values in_Bl-itain, but a tightening of the Japanese money ;market. is already reflected in‘ disorganised exchanges, and alarming -slumps in thecommon means of living such as rice and cotton, as well as in silks and other ‘ exp"o"rtable manufactures. It is apparent that the vicious circle of wages and pro‘fits has revolved to crisis ,pitch and rendered some check "to that danger.ous folly essential. British banks have increased their lending rate to 7 per cent., and Government -proposes to place a super-tax on incomes and a graduated tax on profits. The pro--fiteer being ‘faced with super-tax on income from his accumulated wealth, and a graduated tax -on his profits will be faced with quite a novel proposition which will necessitate a‘ readjustment of his financial methods. The graduated tax will render ques-j tionable the profitableness of profiteering prices, and the super-tax on income, on first sight, seems to lend corro‘-boration to that view. Then‘, although a tightening of the money market increases the accumulated wealth of capitalists, it also brings down the value of commodities making living cheaper to the masses, and operates in the direction of lowering wages. Present day Governments ‘either will not, dare not or cannot assail the wealth of the ‘capita?is‘t;' taxation of it is met with" increased interest, and thefworkers have tovfoot ‘the bill forléall “as it "is passed down to ._'them. However"-fsome '-change of a radical character, such a."s'the British Gover-nment’s proposal‘ toftax income as well as profits is veiy necessary in bringing about a. cheapening of the means of living to stem the perpetual demand for increased Wages and to establish a more stable condition of industry. I