LOAN FROM UNITED STATES

Evening Star, Issue 21007, 22 January 1932, Page 8

LOAN FROM UNITED STATES

A VISITOR'S SUGGESTION GOULD BE GOT AT 4 PER GENT. < [Special to the ‘Stae.’] , WELLINGTON, January 22. “If New Zealand wishes a loan abroad this year, why does she noc attempt to raise it in the United States?” asked an American visitor to the dominion to-day. • “ The idea that New Zealand should raise all her loans in London may be sound enough in normal times, bub the present are not normal times. Not only is it not possible for London to continue her lending policy this year, it may not be possible next year. In these circumstances the best thing that this country can do is to look round for another good lender. “The United States to-day is in the position of having more money than she can place at advantage to herself in homo industry.. The post-war period has seen her become more and more a, lending nation, and as is well known, she has made substantial advances to Germany, among other nations. Investors are eager to place Money abroad, and New in my opinion, offers excellent security. “ The bank rate, recently advanced by the Federal Reserve Bank, at the request of England, stands at 4j- per cent'. But the market rate of loans on first-class security is likely to ba less than that before very long. There is so much money looking for investment that rates are bound to tend downward again. An instance of what is happening may bo given; companies which were making profits last year preferred to distribute them among shareholders rather than place them in reserve and be faced with the problem of investment

“ Thiftjieing the case, New Zealand may take it that her inquiries for accommodation in New York would; receive a very sympathetic consideration.: In fact, I know that when a New Zealand Minister of Finance was in the United States! some years ago, overtures were made to him. This shows that my country has had the dominion in view as a possible field of investment for some time.

“ Money' raised' in New York this year may be available at 3 per cent. This would mean that, even after allowing for flotation expenses, the interest rate at present levels would not be more than 4 per cent—say 4£ per cent, af'the outside. This is in marked contrast to the £6 7s 8d which the last loan cost this country in London. There is the additional advantage that a loan in New York just now would carry a substantial premium, and the further likelihood that before very long the exchange rates would adjust themselves and the'burden of the loan not be even as great as those of loans floated at reasonable rates of 4 per cent, and more. “In any case, from what L have seen here, I think that 'a loan this year would .be justified by the release from strain upon the public finances. This is a matter which should be seriously considered by New Zealanders in authority, for the position of New York to-day warrants their attention, and the habit of going to London may have to be broken in any case, and broken for a fairly long period.”