LONDON MONEY LIMITED

Evening Post, Volume CXII, Issue 151, 23 December 1926, Page 11

LONDON MONEY LIMITED

ESPECIAJ-liY FOR UNPOPULAR

BORROWERS,

It seems inevitable that in 1927 the capacity of London to finance tho Dominions will be keenly tested. There are two branches to the question', which concerns tho capacity of London to supply. sufficient money at reasonable,, ra,tes to • (a) bgrrowing Governments of good standing and (b) borrowing Governments whose recent loans'havo met with a. poor reception. In the latter category is New South Wales. London's objection is not necessarily to a Labour Government, but to any Government that, in London's opinion, borrows too freely and spends too loosely.

By making yet another .sinking fund pledge, Mr. Lang virtually admits that London has good economic reason to object to his past loan tactics. By hinting at borrowing in the United State's, he indicates a conrso which may become compulsory for New South Wales. Whether it will become compulsory for the better class, of Dominion borrower is another question. But it

will be remembered that a month or two ago, when Sir Hugh Denison passed through Wellington en route to America to take up the commercial representation of the Commonwealth Government in the United States, he foreshadowed tho need of borrowing in New Yorjc in order to avoid over-taxing London's resources. And as Sir Hugh was not referring particularly to New South Wales, but was speaking on the general question, it may be taken as his opinion that New York • will have to be relied on not only by an. unpopular borrower like New South Wales, but by other Governments. The case of New South Wales is. however, more urgent than most, for Mr. Lang points out that between now and June the New South Wales Government will require some ten millions for loan conversion, apart from the big public works expenditure ho proposes. •Any over-spending . Government is not likely, in the long run, to find a more tender heart in New York than iv London,. It has been said that American lenders will demand not only the sinking fund that Mr. Lang, promises, but a really adequate sinking fund; and, in addition, a clause in the loan, contract providing for the maintenance of the price of the issue at a certain, level by purchase of the bonds in the open market. .London lenders riko no1 such stipulation, A loam is underwritten, and as soon as it is underwritten tho borrower knows approximately what will be nettod aud'nt what cost,

An Australian writer smgggsts that London will prohibit foreign loans, perhaps Dominion loans too.' "This would force the Dominions either tp go to Now York for their loans-^whieh would bo a 'hull-point for sterling—or to fall back upon their own internal resources, The latter movement would havo a pronounced bearing upon internal interest rates."

In fact, New South Wales internal borrowing is more foared in Australia by other States than a Now South Wales, application to.Now York would bo.