THE New Zealand Herald. AND DAILY SOUTHERN CROSS SATURDAY, JANUARY 31, 1914. INSECURITY AND INTEREST.

New Zealand Herald, Volume LI, Issue 15521, 31 January 1914, Page 8

THE New Zealand Herald. AND DAILY SOUTHERN CROSS SATURDAY, JANUARY 31, 1914. INSECURITY AND INTEREST.

The decline in bank rates, which is the outward and Visible sign of ah ihcreased'" amount of cacpitai f "seeking desirable investment,', has"Aeeh promptly followed.by very practical proof that reliable colonial borrowers are once more in favour in the London money' market. :; The anticipation of. the Herald has thus been very pleasingly justified; it may be further prophesied that unless un

toward events occur—events of sufficient gravity to disturb all calculations— cheapness of money- required for sound, colonial development will continue and even increase. For in- addition to a variety of other influences favourable to the legitimate borrower there is a factor at- work which is , wholly .-.in',, pur favour and to which little attention has yet been drawn, although it is probably the key to the situation. That factor is the growing sense of the unreliability of investments in

countries lying outside the . true frontiers 'of civilisation, ' even though they may be within the bounds of the British Empire itself. If we take the countries which within the past year have become practically and financially anarchical we find that they have' sponged up many millions of the hard-

earned capital of the civilised- world and that investors attracted by their undeveloped resources and by the promise of high interest are confronted by the prospect of tremendous losses- China and Mexico are typical instances of these practically insolvent states. The deficit of China is greater than the entire national debt of New Zealand, and this is only a part of the obligations of the Chinese to European investors. Mexico is in a condition of utter financial and commercial collapse and the hundreds of millions of foreign capital thus affected is in a most unenviable plight. Asia Minor and Persia, Venezuela and Colombia, are admittedly in a state of unstable financial equilibrium. They are willing to make almost any, terms to secure good Western gold, but they are notoriously unable to give any adequate security. Confidence in the cruiser and the gunboat as debt-collecting agents has failed in the face of international jealousies and of a marked reluctance on the part of the Powers to assume new responsibilities. If we turn to India and to Egypt, it cannot be questioned that alarming political symptoms have cast a gloomy shadow over the old faith in the ability of the British rulers to maintain law and order. Investors, so fatuously confident a short time ago, have taken the alarm and . have suddenly realised that they take gambling risks when they sink their money irf public or private investments beyond the inner pale of Anglo-Saxondom

and its; immediate European kindred.. As a result we have a natural and inevitable return to national and racial preference in financial investments, a return impelled and inspired by an intelligent reaction of. the supreme value of security. Whatever else may be said ofßritish dominions, their financial integrity is above suspicion. • Their social organisation is identical with that of the nations which have provided capital for the exploitation of the world and their sense of law and order is equally harmonious. Ihey have borrowed money, publicly and privately, upon terms mutually and definitely understood and appreciated by both borrower and lender. They have invested their borrowings with such average shrewdness that they have the wide margin between available assets and pending liabilities which constitutes actual solvency. Possibly the most wasteful expenditure of borrowed money known to a colonial state is to be seen in the railways of New Zealand, where millions have been squandered upon South Island lines which do rot pay Interest on the cost of thei. construction in addition to worki. i? expenses. Yet even the New Zea'and railways make both ends meet, thanks to the North Island earnings, and the expenditure of another ten millions sterling in the North would enable the dead-weight of unprofitable southern lines to be easily borne. What has actually happened in the British dominions is that we borrow upon a basis of production not merely equal but actually superior to that from which loan-money is originally derived. Our wagesrates, our profit-rates, our produc-tion-values, and our taxation-values are all upon a high level, with the result that we can borrow on 'European money' markets' to the advantage' of all our people and with absolute security to the lenders, provided only that we spend our borrowed money in development and with an average -amount of common sense. Add to this that we have the same sense of honesty, the same laws and ;the same pride in national integrity as < - -editor-kinsmen, and the supe' ,rity of .the colonial field to, the investor is incontestable. What do the Chinese myriads, the Hindoo malcontents, the Mexicanrevolutionists or the Egyptian, conspirators, 4 care for national obligations to British lenders? And to do these aliens justice, an increase of taxation at , which our gold-earning colonists only grumble until they become accustomed to it, grinds 'the very faces of these poor and swarming ! peoples. :.; With 'all-four' selfgoverning states, the British are one . nation, v interdependent ;- and -cooperating, borrowing and repaying, asking.or giving financial aid upon mutually^advantageous; : terms A ".as;j though we lived-in- th: as we live under the same,flag" :1s it to be wondered : ; at that in-his recoil from the risks of investment in strange lands and among alien peoples,, the British investor turns with renewed favour to his .colonial countrymen, : whose assiduous "■ borrowing ; may disturb' his old-fash-ioned ■' prejudices', : 'but '- whom ■; he knows to ; pay interest with' clocklike regularity and who have never yet failed, whatever the cost, ,to meet their national- obligations