Taranaki Daily News. FRIDAY, OCTOBER 8, 1920. LOANS AND INTEREST.

Taranaki Daily News, 8 October 1920, Page 4

Taranaki Daily News. FRIDAY, OCTOBER 8, 1920. LOANS AND INTEREST.

■t is generally admitted that the

time has arrived when the general* conditions affecting finance demand serious consideration. To the ordinary citizen this complex subject has no allurement. At the same time every member of the community is directly interested in finance of every description, for it is a permeating agency on which practically the welfare of the people depends, and is inextricably in-

terwoven with every public and private activity. It is now being fully realised how largely the war has affected the nations involved

in the titanic struggle, not only in the serious depletion of capital, but in the holding up of operations essential to progress and national welfare, as well as creating an accumulation of arrears that have to r/e faced with a greatly lessened' available supply of capital, a depreciated currency, and an increased cost which is simply stagger-

ing. The Government must borrow largely to meet its commitments; local bodies must do the same, and money is required for industrial development. This capital must be borrowed under adverse conditions, which naturally operate in raising the rate of interest. , Another disturbing fac-

tor in this connection is the mania for speculation, which lias not only absorbed a* large amount of money urgently needed for national and

local purposes, but has forced up prices of land and the necessary commodities of life. A recent cable from London states that to check

this speculation it is reported the Bank rate will be raised in the near future in order to .compel merchants to disgorge accumulated stocks. Unfortunately, though the object in view is most desirable, the method for its achievement will have a far-reaching ef-

[ feet on the rate of interest on borrowed money. So far as the Dominion is concerned, the casual observer may point to the many millions of money on deposit at the banks, but these accumulations are waiting for investment at the highest rates obtainable, and, even if they sufficed for all the demands of the Government, of local bodies, trade and commerce, will command rates of interest far higher than in the past. The Government has its, compulsory powers'," and though ■Mr. Massey is striving to keep down the rate of interest, it is very doubtful whether he can succeed, for there will certainly come a

time when the market rate will rule. It is local bodies who will feel the pinch moat acutely if the present limit of 5| per cent, is not extended, and as during the current year the amount authorised to be raised by public bodies runs into nearly six millions, some idea may be gained as to the hurdle these bodies have to face. Possibly several of the proposed works are not of supreme urgency, but as they were of sufficient importance to receive the ratepayers' sanction, it may be presumed they are needed, yet the response to the public to invest in debentures at per cent, interest is so meagre, it indicates plainly that the terms are too low. If it were possible to cease borrowing until deflation has taken place it would be eco#SISJSSik |?S&d .*° .t&]?e that

[course, which, however, is imposj sible. Money cannot be borrow- ' ed to-day under six per cent., and it can be assumed that even a higher figure may be regarded as the general rate in the near future, at any rate for short periods. How far this rise will affect loans for public purposes remains to be Been, but the position is sufficiently grave to justify earnest consideration. It is worthy of note that ( the Federal Government's repatriation loan of £25,000,000 at six per cent, was less than half subscribed at the closing date, though a hint of compulsion secured the remaining fourteen millions, and more.