Wairarapa Times-Age TUESDAY, MAY 16, 1939. A RISE IN INTEREST RATES.

Wairarapa Times-Age, 16 May 1939, Page 4

Wairarapa Times-Age TUESDAY, MAY 16, 1939. A RISE IN INTEREST RATES.

FROM the terms of its latest loan proposal as they are outlined in the official announcement made yesterday, it is clear that the- Government is prepared to make a new departure where interest rates are concerned. It is proposed to raise the sum of £4,500,000 within the Dominion at 4 per cent per annum, and investors are offered the alternatives of taking up stock with a term of 15-19 years (at the option of the-Governinent) at £96, or stock having a term of 9| years at £JJ. On tne longer-term issue, the effective yield, taking account of redemption, is approximately £4 8s 8d per annum for 15 yeais and £4 7s 6d for 19 years. In any comparison with London operations, account of course has to be taken of the ruling rate of exchange, but the effective rates now offered seem bound to entail a far-reaching revision of existing conditions where borrowing and interest rates are concerned within the Dominion. Questions of serious importance are raised, for example, with regard to local body finance and also farming .and other industrial finance. Very recently local bodies in this district and elsewhere have been complaining of the difficulty or impossibility of raising loans at the permitted rate of 3| per cent. It will be remembered that in his Budget presented in July last year, the Minister 01. Finance, in a passage dealing with the operations of the State Advances Corporation, said that provision had been made tor capital to be made available, on very advantageous terms, to borrowers for financing the purchase or erection of houses, the purchase of farms, etc., and added that more recently funds have been provided for advancing to local authorities when moneys for capital purposes cannot be obtained from other sources at the standard interest rate of 31 per cent per annum. With the Government offering 4 per cent and an effective return to investors of up to £4 8s 8d per cent for loan money on the local market, a standard interest .rate of 3-j per cent on local body borrowing presumably must be regarded as over and done with for the time being. It is only about four years since the local bodies of the Dominion carried out a general loan conversion scheme at a standard interest rate of 4j pel cent. Evidently, however, the outlook for any new borrowing by kcal bodies is affected considerably by the Government’s present loan operation. Local bodies usually have to pay something over and above the ruling Government rate and the terms of the Government loan now to be floated presumably will open the way to a general upward movement in interest rates. Even at a, time when capital resources have run low, prospect's of the loan being taken up readily by investors are generally agreed to be excellent. As to the repercussions of the flotation on the economic conditions that are developing in the Dominion there are some obvious grounds for uneasiness.

THE DUCE AS PEACEMAKER.

TN diplomatic quarters in London, the speech delivered by Sio'nor Mussolini when opening the Economic Self-Sufficiency Exhibition at, Turin is said to be regarded as having been pacific and moderate. This verdict, apparently was made Dy ignoring a large part of what the speech contained. Ihe Dnce spoke, it is true, of “the sincere desire for peace existing m the totalitarian States,” and said that the objective of his review of the situation was to show that there did not at present exist in Europe problems of such magnitude as to justify a war which would become general. Signor Mussolini also declared, however, that the democracies are not sineerelv devoted to peace and in a. culminating effort asserted that tlie totalitarian States “are arming in orderto he able to safeguard our peace and throw back aggression. The Luce issued a warning against “the continuation of ridiculous illusions and superficial casuistry,” but, his own leading 1 assertions, and not least his (jnaint effort to paint the democracies as ravening wolves and the totalitarian States as resolute but innocent sheep, would be described much too mildly as casuistry. One of his boldest efforts was that in which he asserted that, Italy, Germany and Japan had not abstracted a square metre nor a single individual from the sovereignty of the democracies. It is, of course, true, that Abyssinia, Austria, Spain and China, though they are the victims of lawless aggression, were not, and are not democracies. Czechoslovakia, however, was a democracy setting high standards. The explanation of Signor Mussolini’s amazing assertion may be that by “the democracies,” lie meant, only the British Empire and France. In that case, his “pacific and moderate” proposal would appear to he that the great democracies should stand passively by while freedom is crushed everywhere save in their own territories.

False as the Dnee’s speech rang in its details, his asserted desire for peace is, in itself, to he welcomed. Deep suspicion must attach, however, to assurances of the, kind coming from a dictator whose pojver rests on the ruthless suppression ol freedom in his own country and who pins his faith in foreign policy on a combination of brute force and fraudulent, conspiracy. It is something to the good that Signor Mussolini finds it necessary and advisable even to talk of peace, but his talk rather obviously is insincere. It has been emphasised, for example,' that participation in the system of guarantees now being built up by Hie European democracies is open to all nations intent on peace. Signor Mussolini’s response is to predict that the system of guarantees will collapse like the Versailles Treaty.