Half-way Mark of Conversion

Manawatu Times, Volume LVI, Issue 7107, 16 March 1933, Page 7

Half-way Mark of Conversion

Gratifying Response By Public Announced

NEW ERA OF CHEAP MONEY LOOKED FOR

(Special to Times.)

WELLINGTON, Last Night,

When tho Minister of Finance (Rt. Hon. J. G. Coates) introduced the Government’s conversion proposals into the House of Representatives, ho made it plain that although the annual saving of £570,000 would bo of considerable assistance to the State, the first and primary object of the scheme was not so much to relieve the Budget as to securo a reduction in the general level of interest rates and thus to ease one of the principal burdens under which the industries of the Dominion have been languishing. Although the scheme is still uncompleted, thero are already signs on the stock market that tho Government’s interest reduction, accompanied by the reduction in short-term rates that is to bo made by the banks, will before long have a markedly beneficial effect by initiating a new era of cheap money and so lessening working costs, which are embarrassing almost all forms of business to-dav. The rate payable on gilt-edged Government securities has always been the standard rate of interest in New Zealand, in the opinion of tho Government, and when these gilt-edged securities are reduced to a 4 per cent, basis, money that is at present lying idlo will bo forced out into higher yielding industrial stocks. When tho conversion scheme is out of the way it should thus be possible to float debenture issues on a lower basis than many firms have had to pay at any timo since the wan. The Government contends, therefore, that the fixation of a standard of 4 per cent, interest will not only ease the load that has been piled on to many firms and undertakings faced with falling profits and fixed interest rates, but will also ensure that when the tide of tho depression turns and recovery fully begins, industry will not be hampered by a reluctant investing public. In an article which appeared in the Economic Journal following the introduction of tho British conversion scheme, tho distinguished economist John Maynard Keynes declared: “A reduction of the long-term rate of interest to a low level is probably the most necessary of all measures if we are to escape from the slump and secure a lasting revival of enterprise.” This is precisely the measure which the Government has taken in New Zealand and it is expected to bring about the same valuablo results, though naturally on a smaller scale, as the great British conversion.

By to-night the half-way marks of the conversion had been reached, for the Minister was able to announce that applications and promises to convert now covered £3-1,042,672 of the total debt of £69,514,000 that is in the hands of the public. It is anticipated that conversion of the portion of debt that is held by State departments, another £45,800,000, will be announced within the next few days.

Last Minute Hush Sets In INTERESTING FIGURES SUPPLIED BY MINISTER Per Press Association WELLINGTON, Mar. 15. Although tho closing date is still nino days off. the last minute rush to convert Government securities seems to have begun. At noon to-day applications and promises to convert received by the Treasury covered £33,755,022, compared with £31,826,172 last night. Considering that the bulk of the money now outstanding represents small investments, the receipt of offers totalling almost £2,000,000 in so few hours is for the Government an encouraging sign of the progress of the scheme, particularly since it brings tho total conversions to within a fraction of half of the internal debt actually in the hands of tho public. The complete operation involves £115,000,000, but of this over £45,000,000 is held by State Departments and will be converted by tho Government as a matter of course.

Some interesting statistics showing progress of scheme were issued today by the Minister of Finance, Rt. Hon. J. G. Coates.

Among tlie large holders of Government loans 75 promises and applications for conversions have been received, each covering beof stock, thirty-eight covering between £50,000 and £200,000 worth of stock and nine covering between £200,000 and £1,000,000 worth. There have been four offers of conversion each involving between £1,000,000 and £3,000,000, two between £3,000,000 and £6,000,000, and one, the highest of all, above £6,000,000.

While these larger holders have come forward and accepted conversion of the stocks readily, many of the smaller holders being uncertain of the exact effects of the Government ’s proposals on their own securities, have held back, chiefly because they fear that to convert their stock will prevent them from realising on it when they wish to. They believe that alteration of maturity dates involved in the conversion scheme, will tie up their capital for longer than they anticipated and perhaps embarrass them when they most need it. The Rt. Hon. J. G. Coates has been able to re-assure many of these holdors. By pointing out that their securities are marketable and are more readily marketable than most securities at the present day when the Government stocks have fully maintained their values even under unsettled financial conditions, temgorgjiijr created conversion it salt',