FINANCING THE WAR.

New Zealand Herald, Volume LII, Issue 16026, 18 September 1915, Page 2 (Supplement)

FINANCING THE WAR.

HOW LONG WE CAN KEEP ON? What is the financial outlook in connection .with the war How long can we go on spending more than £5,000,000 a day. about £100,000,000 a month, or £1.200,000.000 a year upon it? The answer of the financial experts in •the city of London is that we could go on spending even these, etupenduoos amounts much longer than the war can possibly last. " , '

They point out that without turning a hair, with very little, personal economy, amid demonstrative -'public waste, we have got, through the first year and duly spent, its .£1,200,000j00Q. The huge expenditure has done little more than make us begin, to talk about economy. We shall, undabtedly, feel the loss in time to come, but as yet we scarcely feel it at all. Our little, economies are, on the whole, pleasant.

How has the £1,200,000,000 for the first year of the war been raised ? Nearly all by cheerful lending, the extra taxation under which we " groan "—it is a grumbling, grimly smiling kind of groan—doing little more than providing the interest and redemption money that has to be paid on the loans. The interest on £1,200 000,000 at 4J, per cent, is £54,000,000 a year for ever.

Mote Borrowing in October. ' The money now raised is estimated to carry us on until about the middle of October, because, although we are spending at the rate of £1,£00,000,000 a year now, the war did not cost so much in its earlier days. After the middle of October. the City experts estimate, we shall have to take recourse to more Exchequer bond and Treasury bill borrowing from the money market, and thus raise funds until early in the new year, when another big public, loan will have to be issued. How can we go on raising £1,200,000,000 a year ? We can do so because our mere savings are £350,000,000 a year, that part of our income which is subjected to incometax is £1,200,000,000 a year; and our total income is £3,000,000,000 a year. To lend war money out of savings obviously does not require extra economy ; to lend a further £850,000,000 out of our total income of £3,000,000.000 will obviously require severe economy. If the time comes that we cannot meet the expense of the war out of our income, then we must begin to draw upon our ,capital. Germany began to draw upon her capital months- ago. That is, her loans have not been raised out of the mere surplus savings of the people, as ours have, nor even out of their income, but out of their possessions. They have been able to pawn, for instance, the|r securities -with war banks specially established by their Government for the purpose. Their Government has lent them paper money on their securities and lias received that paper money in loan subscription. It is good enough, for the German Government is paying in paper money. If and when our Government has to fall back upon that credit-shaking ruse there will be our capital-wealth to fall back upon; and the accumulated wealth of Great Britain is some £17,000,000,000.