CHEAP MONEY

Evening Star, Issue 24005, 2 October 1941, Page 8

CHEAP MONEY

DEAR LIVING QUALIFIED BENEFIT While fully commending the recent £10,000,000 war loan, the ‘ New Zealand Accountants’ Journal ’ points to what it believes is “ a danger to the community ” if a cheap money policy is carried to extremes. “ Low rates of interest,*’ it is held, <( are on a par with low wages.” Reasonable rates of wages and of interest are necessary to real prosperity. ' . “In this Dominion,” the journal proceeds. “we have hundreds, if not thousands, of elderly people who because of their thrift have placed their limited capital on fixed deposit, preferring the lower return but the maximum security. These people must now have their incomes reduced 9r run the risk of placing their capital in speculative enterprises. “ Then, too, we have thousands of life insurance policy-holders who will be prejudicially affected because the earning power of their premiums must diminish, with consequent lower bonuses. A SERIOUS DANGER. “ Another factor also is that beneficiaries in estates, many of them widows and orphans, are seriously affected when capital does not receive a fair interest return. There is another potential danger, and this is perhaps the most serious of all: When money is cheap, all things valued in money tend to rise; that is certainly the case in New Zealand at the present time. The average person, because saving is not worth while, is inclined to indulge in purchasing unproductive capital goods. People are top apt to embark on some undertaking by _ which capital; can be used. The result is that there is a further extension of purchasing power at the very time when there should be in the national interest a limitation of such spending. Saving to lend to the State for war and,other Government purposes is wise; beneficial to the individual and the community.” THE RAINY DAY. " But, while on patriotic grounds, people can reasonably be asked to lend their savings at a low rate to the

State, in other directions facilities should be available to encourage them to set aside something for the inevitable * rainy ’ day. “ In New Zealand to-day there is an excess of money. In 1935 the New Zealand note issue was just over £9,000,000; on September 1, the note issue was £22,000,000. Every pound gives the holder the right to demand a pound’s worth of goods, and there are not the goods available to supply-the demand. . “it is, therefore, imperative that the habit of saving and investing should be developed. Wealth is widely distributed, but many who hold it are not habitual investors and therefore they need encouragement. The best plan to adopt is to allow a fair return on capital.