MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LVIII, Issue 9, 8 December 1937, Page 5

MONEY AND BUSINESS AFFAIRS.

THE ECONOMIC OUTLOOK. (By “H.J.K.”) During the past few weeks The markets have been very much disturbed, with repeated breaks in prices. Actually there has been no real cause for this except the fear of lack of confidence. Notwithstanding the political tension, and the jerks and jumps in various markets, there is no getting away from the fact that the world has made considerable economic progress. World employment and unemployment statistics for the third quarter of the year,' according to the International Labour Office, Geneva, disclose that in nearly all countries is rapidly absorbing the bulk of the unemployed. Can any country wear the cloak of pessimism with such solid facts before us ? The economic situation in the "United States, at one period, looked rather dangerous, but the crisis there is l>eing dealt with. A revival in the domestic trade of the "United States must follow upon the measures being adopted by the Administration to cope with the situation. Better business activity there will help to set the wheels of industry moving in other countries. The repeated breaks in prices on the Stock Exchanges of London and New York are exhibitions of lack of confidence. These markets respond to the slightest changes in politics or in business, It is the former that dominates the position. The politicians seem not to be able to realise that the confidence of capital’is "the foundation of business prosperity. The capitalist, the investor, the speculator, and the lender must be imbued with confidence, if there is to be normal business activity. This confidence has been lacking during the past few months, despite the fact that more workers are in gainful employment, which, in itself, is an indication of improving conditions. Tlie threat of war which has caused universal fear now appears to be receding into the background and the talk now is that there will be no war. And there is much that can be said in support of this. The outstanding fact is that all the nations are fairly well prepared for defence, and who will be mad enough to make the attack ? The Spanish war, which could easily have developed into a great European conflagration, has been held in check, mainly by the efforts of the British. There is the Sino-Japanese conflict, which may very well fizzle out presently. The more reasonable i probability is that it will end in stalemate, for Japan cannot continue exhausting her economic resources with impunity. Japan is trying the patience of Britain and the United States, but no doubt the ■ warning that she has had from London mav damp her ardour. CHRISTMAS FESTIVAL.

Fortunately, we are approaching the great Christmas festival, and the holidays associated with the season, and the goodwill that is. inseparable with Christmas should help to smooth away many difficulties. Investors and speculators will have time to think over matters and recover from their nervous feeling. Really this . Christmas sees the world in better mood to indulge in & trade drive and so help in restoring world prosperity. The conditions warrant optimism. ' Another feature is that money rates are slowly tending upwards. The discount rate on British Treasury bills firmed recently, but that is not of very great significance ; it is the. straw which indicates the direction of the wind. Jt will be remembered that the Australian conversion loan of £11,500.000,_ at 3* per cent., offered at a slight discount, was not taken up by the public, the underwriters being left with 67 per cent, of the issue, whereas a similar loan issued last year was a great success. The inference is that the general body of British investors look for a better return than 3J per cent., and that also is an indication of the upward trend of money rates. Some people are under the impression that cheap money is the basis of economic revival. Were it so, the United States should be experiencing a boom, for,•’■not only is money in abundant supply in that country, but it is also exceedingly cheap, and yet America is troubled with a recession in business activity. It is not cheap money, and all the other schemes and devices of politicians that make for economic revival and prosperity, but confidence. That confidence ex’sts in the United Kingdom, and without doubt there is. considerable business activity in Britain with no signs of any setback. Should'there be any setback, Britain is in a position to grapple with it. The position of Britain is of special interest to us, for the British people are our best customers. COMMONWEALTH LOAN. The Commonwealth Government 1 is: floatingVa loan • in Australia for £B,000.000, V bearing interest at 3J per cent., with a currency of 14 years. As the issub price is £99 15s for every 1 £IOO bond, the effective rate of "inter-

est is £3 15s 6d per cent. This is tlie second internal loan floated by the Commonwealth Government this year. The previous loan issued in May was for £7,500,000 at £3 17s 6d per cent., but as the issue price was £99 5s the effective rate of interest was £3 19s Id per cent. The subscription exceeded £7,700,000. It attracted 7000 small investors. The loan now before the public yields a lower rate of interest; nevertheless there are indications that it will lie a success. There is considerable industrial activity in Australia.