MONEY AND BUSINESS AFFAIRS

Manawatu Standard, Volume LVII, Issue 54, 3 February 1937, Page 14

MONEY AND BUSINESS AFFAIRS

ARMAMENTS EXPENDITURE. (By Speaking at Birmingham last week, Mr Neville Chamberlain, Chancellor of the Exchequer, said that “Europe had been living so long in an atmosphere of uneasiness and anxiety that it was difficult to escape the feeling that a crisis was ahead. The terrible burden of armaments is bound to pull down the standard of living.” 'The most striking item of world expenditure today is in connection with preparations for war. From a total of £1,250,000,Cfi0 in 1928-29, defence expenditure rose to the enormous aggregate of £2,900,000,000 in 1936, or more than three and one-half times the amount spent in 1913.

Naturally, there is internal activity in every European country; but it is recognised that, if continued as at present, it mtist end either in war, or an economic crisis surpassing the one that we have scarcely finished with. For this reason it may be injudicious to look upon present prices for raw materials, non-ferrous metals, and iron and steel, as having a good foundation. Britain has no illusions on the subject, and yet Britain has been not only forced to spend many millions on defence, but is also speeding up the work. This is interfering with international trade, although British manufacturers are doing their best to maintain contact with their overseas customers. The current year should see the heaviest part of the defence programmes completed. NO SPECULATIVE MANIA.

The level-headed British businessmen and investors in stock exchange securities realise that the business activity of to-day is to some extent artificial, and largely due to armament expenditure. Testimony of this business sanity is forthcoming from so prominent a banker as Mr Reginald McKenna, chairman of the Midland Bank, who told the shareholders at the annual meeting that at present there were no signs of speculative mania in Britain. The banks can, of course, prevent this by restricting credit to legitimate trade, and refuse money to speculators. - Another interesting remark of the banker was that recovery liad not yet ended and that there were no signs that business expansion was leading to dearer money. AVOIDING SLUMPS.

Mr J. Maynard Keynes advocates revolutionary ways of avoiding slumps. In his opinion dear money should be avoided. He believes that Britain is now approaching a boom, but that to damp it down in the traditional method of high interest rate would be fatal. Expenditure on public and local government works, be considers, should be curtailed. Imports should be welcomed. Britain, he points out, has a plethora of gold, and some of it could be used to purchase products of raw material countries, which, at a later date, could use the gold;to purchase the manufactures of Britain, when the British home demand has become saturated. BRITAIN’S CAPITAL ISSUES.

There was a substantial increase in new capital issues in Britain last year, according to the Statist. The total volume of emissions for the three months ended November 30 last amounted to nearly £55,750,000, as compared with £22,500,000 in the corresponding period of 1935. The figures relate solely to issues of new money, and exclude issues made for the purpose of converting existing loans. In the first eleven months of 1936, the total amount of new capital amounted to some £201,750,000, which, though it was a full £25,000,000 higher than the total in the corresponding period of 1935, was still substantially lower than in 1928, when the full year saw emissions to a total of over £375,000,000. There has been a substantial change in the destination of the new capital subscribed. In 1928, the amount destined for abroad was over £76,000,000, while oversea Empire countries took nearly £81,500,000. Under the influence of the Treasury ban, which itself was prompted by the basic deterioration in the nation’s trade balance, the figures for foreign issues have fallen to the negligible total of less than £1,500,000 in the eleven months of last year, while Empire countries account for only £19,000,000. Thus the applications of British capital outside of Great Britain have fallen from £158,000,000 to a bare £20.000,000 and home users of capital, who took some £181,000,000 last year, have surpassed the total of any full year since 1928. There is some danger of the capital equipment companies becoming over-capitalised, and perhaps leading to speculative production. There is a general belief that Britain should throw open her capital market to credit-worthy foreign countries. Germany made tentative inquiries .regarding a loan issue in London, but she received no encouragement. But there are other countries that could be helped with profit, such as China and Turkey. FRENCH FINANCE.

The Bank of France discount rate was rushed up last week-end to 4 per cent., or double the previously existing rate. The immediate cause is said to be the prospect of a further devaluation of the franc. Gold is being withdrawn from the central bank and sent to London or New York for safekeeping. France has a growing Budget deficit, and depreciating the currency would enable the State finance to be cased. LOCAL CONDITIONS.

Financial conditions locally are quite satisfactory. People who have incometax to pay, and that is a large percentage of the adult population, are preparing for this sad event. In every case without exception more has to be paid this year than last year.