The Daily News. THURSDAY, OCTOBER 13, 1921. BORROWING FROM AMERICA

Taranaki Daily News, 13 October 1921, Page 4

The Daily News. THURSDAY, OCTOBER 13, 1921. BORROWING FROM AMERICA

In criticising the action of the Queensland Government for resorting to the American money market for a loan of twelve million dollars (£2,400,000) it must be remembered that in conseqtienee of the boycott on the London market (due to land tenure repudiation by the Queensland Government) there was practically no option but to obtain money from America. Under the circumstances the transaction has all the appearance of a gamble on both sides, the borrowers risking being willing to face the present disadvantages of the firmness in the American exchange on the chance that it will improve later, and they will reap the benefit, while the lenders take the risks that were not acceptable- to London financiers and rely on a continuance of the exchange being in their favor. The terms on -which the loan has been floated bear out this view. The loan is stated by one authority to work out at £7 7s 4d per cent., is repayable by twenty equal annual instalments, which, after the first five years, must be at> the rate of £lO2 10s per cent. 'According to another authority, Queensland will return £250 for every £lOO received, while the Morning Post states the loan will cost £7 2s per cent. The Wall Street financiers may well plume themselves on the result of the. deal, and it is not surprising to learn that they have plenty more money to place on the same terms. The outstanding points of this transaction are, firstly, the undesirableness of the British Dominions increasing, instead of reducing, the Empire’s indebtedness to the United States, and, secondly, the prejudicial effect that must ensue by reason of such a high rate of interest being paid and the nature of the terms. Apart from these aspects of the case there is the financial status of Great Britain to be considered. American representatives have for a long time past been unsuccessfully endeavoring to establish financial relations with the Dominions. To combat this move, numerous consultations of London financiers were held’ with the Dominions’ advisers, as the result of which it was generally understood that, as long as London was prepared to finance the Dominions, the-latter Were not prepared to assist American enterprises to transfer the world's financial centre Jp New York- It may be argued that the Queensland Government was either compelled to obtain money from America or go without, and so, being in urgent need of a loan, took the line that led to the desired goal, regardless of consequences. It is just what might be expected from a Government that lends itself to alleged repudiatory. legislation, but, unfortunately, the example is one that seriously reflects on .the Dominions generally, while it- will probably effectually prevent the State from again approaching the London market in the event of American financiers declining any future application for accommodation. That, of course, is Queensland’s affair, but it shpuld act as a grave warning to any other Government in the Empire placing itself in such an unfavorable position. The precedent is one that might well engage the attention of the Federal Government with a view to protecting the credit of the Commonwealth. Moreover, it affords an object lesson of the dangers inherent to extreme Labor rule. At the same time the Loudon financiers are not. wholly free from blame, it being stated that “the Australian States were disappointed at the low minimum of New South Wales compared with South Africa and Ceylon, because it would have an unfavorable reaction on other States contemplating borrowing.” If London is still to be the world’s financial centre, then the financiers there must make it their business to deal fairly and justly, even if not preferentially, with aid the Dominions requiring loans. It is probable that at the present time and in the immediate future the Dominions will need some twenty or thirty millions, probably more, and. the question of supplying these needs confronts the London money market. The failure of that market to respond would be exactly what Wall Street operators would welcome —an opportunity to obtain for New York the control of the money markets of the world. What this would mean can readily be imagined. It is to be hoped, however, that such a calamity for the British Empire will never be allowed to happen, hence the need for London financiers to view this problem in all its bearings and to take effective means for its solution. There can be no doubt as to the seriousness of’the position and the imperative need for stringent economy. In spite of the war there is still money available at Home, but it is 1

in the hands of the few, and according to how the holders treat the would-be borrowers, so will the Empire either regain its normal prosperity or get deeper into trouble- It is quite as important that the financial needs of the Dominions should be met by favorable loans now as it was during the war. The more progress is facilitated and development fostered the sooner will normality be reached —but. there should be no borrowing from America.