LONDON FUNDS PROBLEM.

Kaikoura Star, Volume LIV, Issue 37, 14 May 1934, Page 3

LONDON FUNDS PROBLEM.

HIGH EXCHANGE AFTERMATH.

‘There is no occasion whatsoever for concern over the funds held in London, said Mr Coates a few weeks ago. He was then discounting the criticisms of a London financial journal of the Aew Zealand Government’s exchange policy.- It is difficult at this distance to accurately gauge the measure of concern felt in London over that policy but the increase in concern about it in New’ Zealand is beyond question. Mr Coates has stated that tho exchange surplus in London was £20,000,000. What is it to-day?

In these times, of course, millions are spoken of as airily as tens of thousands used to be and that not so very longago. Even £20,000,000, although ’a good round sum, may be quite lightly regarded. But as Mercutio said of his mortal wound, “ ’Tis not so deep as a well nor so wide as a church door; but ’tis enough, ’twill serve. ’ ’

This £20,000,000 in London then represents £25,000,000 in New Zealand. Who has to find that additional £5,000,000? Is it not the people of New Zealand? It is not the banks, for they are indemnified against loss on exchange, although their profits have necessarily suffered through the reduction in the volume of their exchange business. As the Government requires some £8,000,000 in London for its own purposes that would leave £12,000,000 of the £20,000,000 available for New Zealand importers or whoever else requires money in London. But the merchants have kept an extraordinary tight rein on their indenting. Besides this £12,000,000 if they or anybody else wanted it, would cost £15,000,000 in New Zealand.

Does this unwonted £12,000,000 in London (if it is no more than £12,000,000) give the Government any concern? Seemingly, none whatsoever. The Reserve Bank is to take it over. These funds have been bought from the banks and the banks have been paid for them in Treasury bills. Tho Reserve Bank is to take over the Treasury bills from the banks and pay for them in .banknotes. Laymen, who may deplore their own lack of financial erudition, nevertheless constitute the great majority of direct and indirect taxpayers. They are asking, not without some anxiety, bow this thing is to de bone, they will continue so asking until they are told so in plain and simple language and are convinced that its success is beyond doubt. They are becoming more and more befogged, and for the moment the Government appears indisposed to dispel their uncertainty. LOCAL