The Bay of Plenty Times THURSDAY, MAY Ist, 1941 WAR AND ECONOMICS

Bay of Plenty Times, Volume LXIX, Issue 13326, 1 May 1941, Page 4

The Bay of Plenty Times THURSDAY, MAY Ist, 1941 WAR AND ECONOMICS

The uncertainty of the war in the Balkans, which the British Government lias never described as being other than serious, is having- an adverse effect on the Stock Exchanges. The London and New York Exchanges have been reported weaker, and the Australian and New Zealand Exchanges have also been weaker. In New Zealand, however, other influences have been at work. The high taxation is eating into profits, and the joint stock companies are finding it difficult to maintain dividends. Since Easter values on the Stock Exchanges of the Dominion have fallen by an average of about 5 per cent. In one respect the investment position is peculiar. There is an abundance of money; about £56,000,000 in free deposits lies idle in the banks, for which the owners would be glad to find temporary investment.. These people are anxious to invest and just now they see no safe investment that will fit their requirements' except Government stocks and bonds, and these are reported to be in exceptionally strong demand, with values showing an upward tendency. This means that money rates are tending downwards, and perhaps this tendency will continue. The lower money rates go now, the higher they will go when the up- swing of the pendulum begins. The war necessitates that money rates should be low. Notwithstanding the heavy borrowing, or exceptional demand for money, the rates are kept lower arbitrarily by legislation. When the war ends and economic conditions are allowed to take their course, money rates will advance, for the demand for funds by the nations will 1 be very strong, and rates for money will advance. But so-called dear money is not an economic calamity; on the contrary, if money is dear, prices of goods and services must be lower, and what this country needs more than cheap money, is cheap goods and services. If money rates advance, as many believe they will, then there must follow a drastic adjustment of costs of production and manufacture. Those who fancy that wages could be stabilized by legislation, will presently wake up to find that they have been dreaming. Violent economic changes are in store for the world, but that need not alarm us. Economic changes are continuous, but after 1 the war, the changes will be such as we have never previously known, nor will they be all bad. It is not nature's way to pile up troubles, and not permit a ray of what, for a better term, we may call good luck. There will be plenty of good, although it may not be apparent at the ontset. So far as the British Commonwealth is concerned the good thing that will follow upon the war, is that the United States and the Empire will be more closely knit. The process of international and lasting-friendship between the two Eng-lish-speaking countries, is now shaping itself in no uncertain way. The United States is drifting into war. Her aid to Britain is bountiful, and not only is she sending war supplies, but she is taking steps to see that the ships carrying the goods reach their destination. In short, America intends to convoy the ships across the Atlantic, and if a German U-boat torpedoes an American warship it will be an act of war, and give the United States the right to declare war on the Axis Powers. The outstanding fact remains that the United Kingdom and the United States are in close collaboration, and this collaboration is extending to questions not very directly concerned with the war.