FLIGHT OF CAPITAL

Evening Post, Volume CXXVI, Issue 74, 24 September 1938, Page 20

FLIGHT OF CAPITAL

INVESTORS NERVOUS

FUNDS RUNNING SHORT "I wonder when people will become really alive to the serious situation that is developing through the depletion of our London funds" said Mf. O. C. Mazengarb, National candidate for Wellington Suburbs, in an address to the settlers in Stokes Valley last evening.

Mr. Mazengarb proceeded by quoting figures to show that in the past year there had been a drop of £6,428,000 in our sterling reserves and a noticeable feature was the fact that nearly 'two millions of that sum had vanished during the period that the Social Security Bill was under^ discussion. It was the projected increased expenditure under this Bill that had made investors really nervous; and as an indication that their fear showed no sign of abating there was another drop of £434,337 revealed in this week's figures, leaving our sterling funds now at a record low level of £12,247,006.

The Minister of Finance had foreseen the possibility that extreme socialistic legislation would cause such a flight of capital as this, and, in order to stop it, he took dictatorial powers in his very first financial legislation. But now when he could see the emergency arising he was torn between two conflicting ideas —either he had to exercise those powers before the election and frighten thousands of people from again voting Labour or else he had to let the drift continue and act after the election, which would be like locking the stable door after the horse had bolted.

One reason for having a satisfactory sterling balance in London, said Mr. Mazengarb, was that it enabled us to renew loans on favourable terms. LOan money of about nineteen million pounds was due for payment in about a year's time. Whoever was in charge of the country's finances next year would seek to convert that loan. "If we have funds there to our credit we will be able to call the tune with those investors who are unwilling to convert at a reasonable rate of inters est," said Mr, Mazengarb. "But if our sterling reserves are further depleted, or even if they remain as at present, we will be in a poor position to strike a bargain." There were over 60 people present, and on the motion of Mr. H. Kitchener, Mr.'Mazengarb was accorded a unanimous vote of thanks and confidence.