Bay of Plenty Times. EVENING DALLY MONDAY, JANUARY 27th., 1936. LENDING OF CAPITAL.

Bay of Plenty Times, Volume LXIV, Issue 11933, 27 January 1936, Page 2

Bay of Plenty Times. EVENING DALLY MONDAY, JANUARY 27th., 1936. LENDING OF CAPITAL.

During tlie pant four or five years capital lias accumulated in most countries, and lias remained more or less idle, because, through the lack of confidence, the scope for investment has been narrowed down to gilt-edged securities and a very restricted variety of industrial and commercial shares. This position has been the result of the depression, which has caused restriction of trade, unemployment, and the other evils of which we have had experience. The depression upset the world economic structure, and put it out of balance. It is now slowly—very slowly—righting itself, and as this process increases there will be a growing demand for loanable

I credit, or liquid capital, at steadily 'increasing rates of interest. The capitalist, much too frequently comes in for severe criticism by the unthinking in the community. The practice of lending at interest encourages thrift by holding out the promise of an assured income for declining years, it affords opportunity for young men to advance more rapidly than would otherwise be possible, serves in accomplishing the ; most complete use of the country’s ' supply of capital, and promotes social stability. Furthermore, a fund of capital is made available for the employment of labour and the improvement of industry, the benefits of which are diffused throughout the community. An economist of some note holds that labour, owners’ capital, and loaned capital are distinct factors in industry, although co-operat-ing. The supply of capital available for loans, and the share which this capital obtains in the process of industry, are determined, first by the number of persons who can be induced to save for capital, and then by the choice

which they may make as to the form of their investment. As between different employments of capital there is automatic relation. Those who choose to lend at the market rate and forego the chance of a larger return in business do so for the assurance ot safety, while those who make the choice for employing borrowed capital do so for the chance of profit; and the preponderance of choice determines interest rates. Labour shares in the benefits of all capital accumulations through an increasing demand for labour and an increasing supply of consumable goods. It is to be considered that as a result of the ‘roundabout” method of modern production, by which labour is first employed to make machinery, and the machinery is then employed to produce cosnumable goods, practically all of the invested capital upon which interest is paid is invested by way of payment of wages. Interest is the wage of capital, and the higher the interest the greater the inducement to save for capital, and the greater the volume of capital employed, the better for the wage earners of a country. Neither the capitalist nor the worker can be regarded as the only pebble on the beach. Capital has many functions to perform not the least of which is to bridge the period between seed time and harvest. We want more capital, and still more capital, and we want that capital fully employed, for that is the road to real lasting prosperity.