FOREIGN LOANS TO BRITISH COLONIES.

New Zealand Herald, Volume XLIX, Issue 15123, 14 October 1912, Page 6

FOREIGN LOANS TO BRITISH COLONIES.

The announcement that the New South Wales Government Is borrowing a loan of £3,000,000 on the Continent, presumably in Paris, marks a new and not altogether attractive financial development. - It goes without saying that under ' normal conditions money is lent to the borrower who offers the best interest upon a given form of security, and is borrowed where it can be obtained with the least difficulty and upon the best terms. The suggestion that colonial loans could be obtained at favourable terms on other than British money markets has been frequently'made, but the custom and practice in colonial loan flotations has hitherto been to keep them under the flag. The tightness of the London market has apparently broken this safe custom, and it is extremely probable that the new precedent, once established, will be widely followed. British financiers have not only been drawn upon for enormous amounts for colonial purposes, but have almost illimitable opportunities for investment both within and outside of the Empire. French financiers have greater difficulty in satisfactorily investing the constantly accumulating savings of their industrious and thrifty nation. Of late they have been reducing as far as possible the outflowing of French money to countries with which the political relations of France are somewhat strained. There are always openings for speculation, but the first-class investments, so dear to the more conservative element in France, are not bo easily found. At 4 per cent, the bond of a British • self-governing state must be exceedingly acceptable to a large number of French investors and — as New Zealand found very .recently —a British colony has to pay nearly 5 per cent, for money in London Ihe foreign investor will be applied to with increasing frequency. The ultimate effect, however, may be to introduce an undesirable influence into our political life. The British investor is one of ourselves. The United Kingdom has a constitutional relation with its colonies, which cannot pos> sibly be affected by any financial influence. A foreign creditor is very differently situated. The British States might easily absorb many millions of foreign capital, and might possibly become dependent upon foreign financiers for further supplies. Borrowing, often necessary, is also a habit and one almost impossible to break. It is easily conceivable that circumstances might arise. in which indebtedness to foreign countries might prove unfortunate, for every civilised Government cairies a vague but very real power of attorney, as between those of its citizens who invest in foreign loans and the state which borrows from them. But, preferable as it would be for British colonies to borrow only in British countries, it is inevitable that they should float their loans wherever money is cheapest.