The Hastings Standard Published Daily. TUESDAY, SEPT. 15, 1896. THE COLLAPSE OF CREDIT.

Hastings Standard, Issue 121, 15 September 1896, Page 2

The Hastings Standard Published Daily.

TUESDAY, SEPT. 15, 1896. THE COLLAPSE OF CREDIT.

For the cause that lacks assistance, For the wrongs that need resistance, For the future in the distance, And the good that we can do.

The cable messages of last week informed us of a disturbance in the financial world. The simple statement that " the Bank of England discount rate is now per cent " has a deep significance for the whole world. The Bank of England is the nerve centre of the monetary world, and a pulsation at the centre is carried along the radiating nerves to their extreme ends ; thus every part of the civilized world is moved in sympathy. About March, 1894, owing to the extremely easy conditions of the money market, the Bank rate was reduced to 2 per cent. The reduction could have gone further, but the traditions of the Bank barred the way. In the same manner the rest or reserve of the Bank is never allowed to run down below £3,000,000. The 2 per cent, or as it may be termed the Bank's bed-rock discount rate, maintained this level ever since, or rather until last Wednesday, when the financial magnates of Lombard-street were startled with the announcement of an advance. In the interval between March, 1894, and September, 1896, there have been political events which would have warranted the tightening of the cords of credit. To go no further back than the beginning of this year, we find that England was on the verge of war both with Germany and the United States—with the former, owing to the incidents of the Jameson raid on the Transvaal, and with the latter over the Venezuela incident. Yet the Bank [maintained its bed-rock discount rate undisturbed. The sudden movement in raising the discount rate and which is certain to be felt ail orer the world, is«due we

are told, to the heavy withdrawals of the precious metal on American account, the exportation since the sth August amounting to nearly five millions sterling. The sum seems very insignificant and its effect on the figures of the Bank is not appreciable, while a comparison of the reserve of to-day with that of the corresponding period of last year shows a very minute difference against 1896. The money market has been in a condition of painful easiness, and there seemed not the slightest indication of a change sufficient to warrant the significant movement of the Bank of England. As a matter of fact the cables tell us that Lombard Street was taken by surprise. The raising of the rate by the Bank of England practically meant the collapse of credit, or the end of the reign of cheap money, and its effect will be to cause a fall in the price of gilt-edged securities and a corresponding decline in the value of investment stocks, while flimsy mining shares will collapse entirely. The Bank of England has virtually "banged the market" and already Home railway shares and South African mining shares have felt the pinch. We shall hear of a sullen response to the financial charge from New York, from Paris, from Berlin, from Vienna and from St Petersburg. The continental bourses will feel the flutter and punters and speculators will be mortified. The wave will reach us in due course, and sooner than we expect, for unfortunately it will seriously effect the inflow of British capital for the development of our mineral areas. A stoppage in this direction will kill the share market, and instead of profit there will be loss to the many hungry speculators. Of course it is needless to say that the Bank of England would never take so sarious a step unless absolutely warranted by the circumstances. It does not seem from the limited information that is available to us in New Zealand, that the condition of the money market necessitated the advance, and if we accept this as a settled fact, wo must look for the solution of the problem in the unsettled state of European politics. We showed a few days ago in this column that the Great Powers are strained in their foreign relations at almost all parts of the compass, and that the centre of the political unrest was in the effete and tumbling Turkish Empire. Does the action of the Bank of England imply that Her Majesty's Government, weary of its efforts to join the Great Powers in concerted action, intends to force a settlement of the Eastern question single-handed ? "It is reported that the Powers are considering the advisability of deposing the Sultan " is the purport of a recent cablegram and in that lurks gunpowder. If, say, the Powers forming the Triple Alliance, together with the United States, give to Great Britain their moral support, with a promise of active support should it be necessary, Lord Salisburymay be tempted to interfere and stop the indiscriminate butchery indulged in by the Turks. So far Lord Salisbury has failed in his foreign policy, and an opening of any kind that will help him to retrieve his position would no doubt be welcomed. It is however, a waste of energy speculating on the probabilities. The stern fact remains that the Bank of England has violently disturbed the money market, which we in New Zealand in common with the rest of the world must feel. W T hatever may be the cause of the rise in the discount rate, it is bad for business, trade, and commerce, and will remain so until we settle down to the new order of things. It is unfortunate for " King Eichard " with his proposed million loan, for which in all probability a stiff price will have to be paid.