GOVERNMENT LOANS.

Press, Volume LV, Issue 10149, 23 September 1898, Page 5

GOVERNMENT LOANS.

TO THE EDITOR OT THE PRESS. Sir,—Mr G. W. Russell's letter, published by you a few days ago, makes it- cleat that M. Stead's suggestion. that the Government should borrow locally in small sums is by no means original, except as regards the payment of the very high rate of £4 per cent.

I sincerely trust that it will not be acted on. If capitalists can get £4 per cent, for money from the Government, 1 should like to know whc is going to lend money on mortgage? Much of oiu present prosperity is owing to the low rates at which money is obtainable on mortgage; £5 per cent, is the normal rate at< present, though a good deal has been obtainable at £4 10s per cent. The mortgage tax reduces these rates to the lender by a half per cent., and a further deduction may fairly be estimated for loss of interest in looking out for suitable investment, loss on securities and agent's and other expenses. Persons who therefore only get something less than £4 10s pfcr cent, by lending on mortgage, would oaturally prefer Government debentures at £4 per cent, on which there is no mortgage tax and no risk of lass, on which the interest would be paid to the daj, and on transfers of which there would be nc legal expenses. These securities would have a particular attraction for trustees, who form a large proportion of oui mortgagees, who would thus get a security which would entail no trouble, no risk and no expense. It is clear, therefore, that the Government in borrowing locally at £4 per cent., would be simply entering into competition with the farmers for cheap money, and that they would be successful in deflecting a certain amount of mortgage money from the farmers. The natural consequence would be that rates of interest on mortgage would rise, and the farmers would suffer.

Moreover, I feel sure that if the Government are encouraged to borrow locally, it will simply be an incentive to borrowing, for they will then not have the fear ot the English moneylender before their eyes. I agree with _v_r Stead in thinking that the Stock Exchange gets too much profit out of our loans. This, I think, arises from the fact that we always want to get the whole of a loan subscribed l for at once, though we only want the money by instalments. I believe that if we advertised a loan to be issued at par as applied for, we should get it taken up at least as fast as we should require the money. The rate need not be more than £53 per cent, at present. The actual investor would then apply for it. The success of this method would be still-more ensilred if we could arrange with all the Australian colonies to issue their loans in the same way. Of course, all the Stock Exchange people and the financial authorities will tell you that it would not succeed, because they would get no commission out of it.

We might also make a further saving if we could! arrange with all the Australian colonies to open an office for inscription of all colonial loans. The terms of our loans ought also to be reduced from 50 to 25 years.—Yours, &c, FARMER.