THE Temuka Leader. TUESDAY, FEBRUARY 14, 1893. THE RATE OF INTEREST.

Temuka Leader, Issue 2464, 14 February 1893, Page 2

THE Temuka Leader. TUESDAY, FEBRUARY 14, 1893. THE RATE OF INTEREST.

Notwithstanding the utter failure of the cry, the Hon. W. Kolleston still clings tenaciously to the “shriek of panic” about capital leaving the colony. In his recent speech at Halswell he insisted that capital was leaving the colony, and read an extract from a pamphlet in which an English financier said that the policy of this country was not favorable to any company lending money on mortgage. The cry has not been a success, and we should advise Mr Bolieston to give it up. It has been discredited by every circumstance which has arisen, and it is astonishing how anyone claiming to be sane can resort to it now. We must, however, make an allowance for persons of limited resources. They must say something, and perhaps on this plea Mr Holleston can be excused. But since Mr JRolleston spoke at Halswell, the banks of this colony have made it more palpable than ever that the cry of frightened capital is utter nonsense, by reducing the rate of interest. The cry used to be that capital would leave the country, that the rate of interest would go up, and that consequently the farmers would have to pay more for their loans. This has now been proved entirely erroneous by the action of the banks in reducing the rate of interest, and so it is to be hoped that wo have heard the last of it. It has been frequently said that it was the policy of the present Government that caused the banks to raise the price of money, but this is not true. The fixed deposit rates had bee i raised from ih to 5 per cent, by the banka long before Mr Ballauce introduced his fiscal proposals, and there was no connection between the two things. Indeed, it is generally supposed that there never was any necessity for raising the rate of interest in this colony. There was at the time heaps of money on deposit in the banks, and why the rate was increased was more than people outside the charmed circle could tell. It is certain that it was not because the banks wanted money, but the most j probable reason is that it was due to the monetary disturbances in Australia. There a large number of monetary institutions which have since crumbled, were tottering to the ground, and the rate of interest was, we believe, raised in the vain hope of being able to avert the impending disaster. Such institutions wanted money, and their only way of getting it was to offer a higher rate of interest on fixed deposits, but no bank could do this unless all the banks did it, as there is a trades-union amongst them, by which they are bound not to do certain things until they have all agreed to do it. The banks of Australia were, therefore, in our opinion, the cause of the rate of interest being raised, for there was no necessity for it in New Zealand. It may be asked why should New Zealand have to raise the price because the Australian banks found it necessary to do so ? One of the reasons is that this tradesunion exists between them, and another is that if the banks of this colony gave only per cent, while the Australian banks were giving 5 per cent, on deposit, a great deal of our money would go over to Australia to earn the higher rate. When, therefore, the Australian banks found it necessary to raise the rate of interest, the New Zealand banks had to do the same in self-defence, and that, we believe. Is the explanation of the whole thing. When the rate was raised in this country no one could understand the cause of it. Banks do not increase the rate of interest unless they want money, and that they did not want then. Now the storm has blown over Australia, the rotten branches have been lopped olf, and I pp)id institutions find themselves in a I potfiHKi if) reduce the rates. There cm Wb doubt that the . • «ou«l thing f.or Australia, reduction is a _ -i were because it will compt- . ,+. tliay b ot contented with the o perce... from the bank to look out for some 0m... investment, and they will be glad now to get shares in companies or lisk it pursuits which will develop our resources, it will also have the elfect of bringing down the rate of interest all round, so that borrowers may expect to get cheaper money. This, of course, means that people will launch one and extend their business, while others will engage in fresh enterprises ; and thus now life, as it were, will be put into the whole colony by it There is another thing : our Government may require to borrow some money for the purposes of extending settlement, and if they do they will find it very easy to get now. Looked at from every point of view, therefore, the lowering of the rate of interest isa splendid thing for the colony, and one thing it will do above all, it will stop the mouths of those who are trying to frighten people with the cry of frightened capital. ENGLAND. What is to become of old England? Her exports and imports are contracting every year at an enormous rate; her fanners are on the verge of ruin; her industries arc languishing, and her unemployed are increasing, while no effort is being put forth to effect any alteration. The outlook there is certainly very dismal, and the worst feature of it is that the prospects of improvement are remote. So far as anyone cau aee ? England is

suffering from the result of successful competition. By means of improved machinery she practically held a monopoly of trade, but now other countries have imitated her in this respect, and are successfully competing with her. Other countries, too, have advantages which she does not possess; they have cheaper labor, and protection against outside competition. She would not allow the Khedive of Egypt to appoint a Minister she does not like, but she allows other countries to build up stone walL, by the means of Custom-house duties, which shuts her out of their markets, while she opens her ports to them. This is really silly. Ereetrade and Protection are like peace and war. Peace is very line so lung as all nations remain peaceful, but the moment any nation is attacked selfdefence becomes a necessity. So it i 3 with Ereetrade, but when only one nation practices it that nation must suffer. Almost every nation in the world, except England, is still more or less Protectionist, and her condition is becoming more and more deplorable every year, yet she sticks to her fetish more tenaciously than ever. There is only one hope for her, awd it is that if the Americans remove any of the restrictions they have placed on commerce she may secure a share of the trade of that country. At any rate, the prospects are not very bright just now, and there is nothing likely to improve them so far as we can see.