THE H.B. TRIBUNE. SATURDAY, MARCH 18, 1922. BRITISH BANKER’S VIEWS.

Hawke's Bay Tribune, Volume XII, Issue 84, 18 March 1922, Page 4

THE H.B. TRIBUNE. SATURDAY, MARCH 18, 1922. BRITISH BANKER’S VIEWS.

One of the most concise yet comprehensive contributions to the discussion of the financial ami commercial outlook in Great Britain is to be found in the speech in which the chairman of Barclays Bank, Limited, Mr. F. C. Goodenough, addressed the annual meeting of shareholders held just a day or two before our last mail left London. For us, just now, perhaps the most interesting topic on which he touched was the distinct easing of the money market, resulting in sub stantial reductions in current interest rates. As one means of showing the effect of this he points out that, taking by way of example five of the principal issues of Government securities nominally amounting' to 3,000 millions, it was found that their then selling values had, as compared with those at the beginning of 1921, improved by some 270 millions, or 9 per cent. The average rate at which the Government had raised money on short-dated Treasury bills during the last nine months of the year had been 4J per cent., as against per cent, for the corresponding period of 1920, while the long-term Treasury bonds had come down to 5i and 5 per cent, compared with the equivalent of nearly 7 per cent, at the beginning of last year. After some further reference to the effects in the Old Country of what he calls “the policy of cheaper money by allowing it to find its own level” —a policy which he seems to suggest might quite practicably and advantageously have been adopted much earlier — he goes on to say:—“Another benefit which has accrued through this change of policy is found in the fact that lower rates and easier conditions in the money market have afforded opportunities for several of the Dominions and Colonies, and also for foreign Governments to come to the London market for permanent loans. The proceeds are applied either towards the repayment of floating indebtedness, or for development purposes, and this should in due course give some aid to our industries.”

Of very definite interest as far as the future is concerned is his statement that there is a growing appreciation among London financiers that debts due to Great Britain for money lent abroad for productive purposes form the backbone not only of her financial, but also of her industrial position. “I have often said that, because we cannot ourselves produce all we need for the maintenance of our population we must turn to profitable use all the credit we. can command, employing it, in the first place, in the preparation and development of those markets which will take from us our manufactured goods.” In order to restore and maintain her industrial and financial position, Mr. Goodenough declares, it is essentia' that Great Britain should play a full part in financing the needs of other countries, even in the matter of large and permanent loans. That in speaking thus he had not- foreign countries and customers alone in view is indicated by his expression of opinion later on that “a relatively cheap money market will also tend to restore financal cohesion within the British Empire, which cohesion has been gravely threatened through the dear money policy, and through the disturbance to our own currency

system. Financial cohesion within the Empire,” he adds, "is of great importance both for its development and also for the welfare of our own industrial position. Financial cohesion is also essential for the preservation of the individuality of our race and for the principles which guide it.”

There is also manifest in the speech a note of anxiety lest New York should supersede London as the financial centre of the world. "With keen competition from America,” he says, “we cannot afford to neglect any safe opportunities which may present themselves for loaning money to our customers abroad, nor can. we ignore the advantages in pursuing that policy which accrue through a cheap and plentiful supply of credit.” London, he contends, held its position in the past as a financial centre, through relatively cheap rates of discount and other financial facilities. The, granting of loans resulted in the receipt of orders and, with cheaper conditions for manufacture, secured for Britain her place in the markets of the world. Unless she can maintain those conditions of relative cheapness, it is difficult to see how she is to regain, and retain, that position upon which the wholefuture of the country depends. The chairman rounded off this part of his address by saying that, now a policy of cheaper money had been accepted, there seemed no real reason why interest rates should be any higher in London than in New York, or why, in fact, there should not be a. gradual return to the old conditions under which money was almost invariably cheaper in the British than in the American financial capital. At the same time, we should note particularly just now that “there will, for some years perhaps, probably bo alternate phases of cheap money and dear money, according as supplies of loanable capital are encroached upon to an extent which would cause rates to harden.” Is there no chance cf this process being in rapid progress just now while we in New Zealand arc abstaining from filling our legitimate needs at the present overflowing fountain?