The Guardian And Evening Star, with which is incorporated the West Coast Times. SATURDAY, SEPTEMBER 28, 1929. MOVEMENT OF CAPITAL

Hokitika Guardian, 28 September 1929, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. SATURDAY, SEPTEMBER 28, 1929. MOVEMENT OF CAPITAL

The movement of capital m regard to international transactions is one of the mysteries ol finance. I he movement is of course mainly stimulated by trade and commerce, but there are so many debtor. nations‘that the international movement of money has become a great factor in world aifairs. '1 lie settlement of the reparations as to the size of the payments is one thing, the actual payments is another. Deb.oi nations to the United Btat.es, particularly the Al.ies, have felt they have been hardly treated, and it took some years for some of the countries to i make up their minds as to a basis on which .a “settlement” might lie arranged. Great Britain agreed to foot its bill with as little delay as possible, and has been going on paying its regular cpiota as cheerfully as possible. But even in respect to those Huge payments, the money did not all leave tne country, and America was notable to hoard it up as a great national reserve. Money is something which requires to be wound fairly rapidly if trade and intercourse are to be kept up buoyantly, and naturally a country to prosper must enjoy a substantial export trade to ensure money coming into the country over and above the cost of production, or a state of insolvency or heavy internal taxation would result. In respect to the case of Great Britain and the United States an American financier who has been delving into the financial relations of the two countries to find out where the national credit came from and where it was going, discovered that last year the United States paid the British merchant marine about one hundred and filfty million dollars for ocean freights, and steamship p-nssasrps. The significance of this payment is that by coincidence it corresponded closelv with the war-debt payments to the United States Treasury bv the British Government. Thai indicated bow the balance of interna'ional canilal mav be maintained and is an interesting illustration of Ibo m-stories o f birth finalice when actually operatin'*. Franco made a bartrain eventually with the United Slates also, about war-debts, but the American Government. did not meet tbe views oh tbc French people as liearlv ns even some nf fl>p Americano venld bnve wished. Still, the settlement was agreed to. Beferfimr to the arraneement, and anronos the matter under notice, a United'States financial journal remar'--edc It is libe.lv that the payments are more formidable in the aggregate than tliev will prove to be in detail. Tbe world is getting used to large figures in international transactions, and

while nobody can demonstrate to a certainty how such large undertakings as the reparations anu inter-allied debt payments will work out in the long run, it is evident that the vast supply ol liquid capital in international markets tends to mum turn the equiliorium. file tear that a debtor counti y will be denuded of capital lias been lound to be groundless. Notwithstanding payments oi large sums, capital does no., on balance, leave'a deotoicountry in siuii anioun.s. The most notable niiancial phenomenon in recent years lias been the great movement of capital into France since 1928, accomplished without serious disturbance 'of the markets front which it lias been taken. Indeed, for the most part it lias not been withdrawn from other markets, although made available in Paris. By the use of international credit it lias been. made useful m more than one market at the same time. Another significant phenomenon has been the movement oi private capital into - Germany from neutiai and creditor countries faster than it has been paid out on account of reparations, much of it coming from the Countries receiving reparations. Wealth cannot he heaped up in one country oi a few countries .to the exclusion of other countries provided the other countries have credit and can make profitable use of capital. This is the principle which governs the movements of capital in the long run, regardless of reparations, debts or the location of ownership. It is said, of course, that interest must be paid on borrowed capital, but interest payments are mingled in the general movements of capital, and the fundamental fact is that a country does not lose capital, on balance, until it becomes relatively cheap. Moreover, it is the country in which capital is employed, i rather than the one in which it is owiied, which has the active benefits of it. ' Holdings of the bonds or slacks of industrial enterprises are not to be compared with possession of the enterprises themselves, with their continuing disbursements on account of operations. The latter support the life of the country, while interest and dividend payments represent liquid capital which may float around the world and never reach the country of ownership. The movement of capital is thus the life blood of the world, and internationally trading intercourse is essential for all lands. Russia has tried to stand out of international trading, but inv is i.een to return to the fold, and it is not improbable that some satisfactory arrangements to that end will he made ' with Great Britain, tbinugh (the Labour Government which is now considering proposals for re-opening the .desired intercourse.