FINANCIAL POLICY

Evening Star, Issue 22271, 24 February 1936, Page 9

FINANCIAL POLICY

POSITION IN LONDON

NOTED ECONOMIST'S CRITICISMS

Press Association—By Telegraph—Copyright

LONDON, February 23,

(Received February 24, at noon.)

The slight rise in gilt-edged stocks is a tribute to the extraordinary respect the City pays to the pronouncements of Mr J. Maynard Keynes. Speaking at the annual meeting of the National Mutual Life Assurance Society, Mr Keynes insisted on the urgency of a further reduction in the long-term rate of interest. He strongly criticised the Treasury in this connection, and declared that instead of attempting to promote confidence and stability by low short-term rates, which were required in order to lower long-term rates, the Treasury was starving the banks and the money market of shortterm securities, and was refunding the floating debt at a higher rate of interest. He quoted as an example recent operations, when the Government borrowed at li per cent, for five years and at 2J per cent, for 25 years in order to repay the short-term debt costing i per cent. There was no rational explanation for that action, he said, except that the Treasury lacked confidence in short-term rates remaining low. “ Since the Treasury largely controls the situation it is natural that humbler folk should be influenced by the Treasury’s apparent apprehensions.” Mr Keynes also considers that' the time has come for a further increase in the volume of bank money, accompanied by an increased supply of Government securities suitable for bank holding. ‘‘-The Bank of England deserves credit for the steps it has taken in this direction, but it has not gone far enough, even to sustain the level of long-term Government securities.”

Mr Keynes considers that the present industrial prices are unduly high, as it is safe to presume not merely the maintenance of present activity but a substantial improvement. Although the immediate result of Mr Keynes’s speech has been to strengthen the gilt-edged market, the financial Press considers that the ultimate effect will be to weaken it, as Mr Keynes clearly revealed to investors the trend of the policy of the Treasury and the Bank of England. Some sections of the stock markets enjoyed the most exciting week of the year. The City’s attention was fixed on rearmament to the exclusion of everything else. Repercussions were felt as far afield as tin shares. BUTTER. The butter market is in a peculiar state. Too much attention was paid to the possibility of inquiry from America, where high prices resulted in several cables for ' quotations for immediate shipment of New Zealand grades. Business, however, did not follow, and the disappointment caused London prices to slip back rapidly and resulted in a more bearish feeling than would otherwise have developed. WOOL. The firmness of the raw material is bringing out new business in tops, especially merinos. The past week was possibly the best since the New Year. A fairly sound and healthy position exists all round. Most topmakers find that, although big contracts are few, the stream of business represents a substantial aggregate. DRIED FRUITS. Australian dried fruits are selling well at firm rates. MEAT.

Meat is easier, as the demand at Smithfield is only fair, while the supplies are heavy.