AVOIDING INFLATION

Gisborne Herald, Volume LXVII, Issue 20190, 7 March 1940, Page 5

AVOIDING INFLATION

REACTION TO LOAN CALL FIRST LONG-TERM ISSUE GUARDING BUYING POWER (Elec. Tel. Copyright—United Press Assn.) (British Official Wireless.) Reed. 11.20 a.m. RUGBY, Mar. 6. The prospectus is published of the Government’s new £300,000,000 3 per cent loan to be issued next week at par with a currency of between 15 and 19 years. The announcement of this first longterm loan to be issued during the war is well received. The City’s comment of the terms of the new loan yesterday was a rise to par of the 3£ per cent war loan for the first time since 1938. It opened this morning at £IOO, but later reacted to £99 17s Gd. The Times says that there is no doubt that in view of its modest amount and the prevalence of some expectation that the terms would not be quite so favourable, the loan will be fully subscribed. It emphasises, however, that this cannot be the last of such loans and that no subsequent loan can be on more favourable terms. Lesson of Great War “We must have no repetition of the finance of the last war which began by offering investors rather over 3§ per cent and endec? by giving him up to 6 per cent on Exchequer bonds, though the bulk of the war borrowing was done at just over 5 per cent,” continues The Times. "This cannot be avoided merely by offering less. “Conditions in which less will be accepted must be preserved by avoiding inflation. It is, therefore, true to say that the success of cheap borrowing now is essential in order to prevent expensive borrowing in the future and that the new loan should exercise a powerful stabilising influence both in the financial and the economic sense.” The Financial News also notes that the real importance of this operation is that its success will materially help to reduce the danger of inflation. ‘‘Those who subscribe to the utmost in this first major issue will have the added satisfaction of knowing, not merely they are helping to pay for the war, but that they are protecting the real purchasing power of their remaining income,” states the Financial News. The Daily Mail’s comment concludes: “Our financial position is sound.”