EUROPEAN BANK RATES.

New Zealand Herald, Volume LXVI, Issue 20241, 29 April 1929, Page 10

EUROPEAN BANK RATES.

The raising of the Berlin bank rate was attributed, in a cablegram published on Saturday, to the pressure of circumstances which the Reichsbank had resisted for several weeks in view of the Reparations Conference, but have now compelled it to resort to the same protective measure as other central banks have taken in the last three months. "When the industrial and domestic trade boom was at about its highest point in October, 1927, the bank raised its discount rate to 7 per cent. ; the subsequent trade decline led to a reduction to G- per cent, on January 12, with an official hint of a further reduction before long. Domestic conditions in Germany as well as in other 'European countries have, however, been dominated by what an American banking authority has termed "the insatiable appetite of the American stock market for credit and the high rates which it will pay." In spite of the efforts of the Federal Reserve Board to restrict the supply of credit, the phenomenal activity on the American stock exchanges still continues, and no doubt partly because oE the official restrictions on internal resources, the demand for credit to sustain it, expressed in the high rates for call loans, has drawn heavily upon foreign money markets. Foreign exchange movements have been increasingly favourable to gold exports to the United States, and in spile of protective measures by European bankers gold has flowed across the Atlantic. Bank rates have been raised in the leading capitals, mainly if not entirely to counteract the influence of New York, but there is a limit to the extent to which such measures can bo used without seriously disturbing domestic conditions. The shipments of gold that have been forced by the weakening of the European exchanges have not, apparently, relieved the situation sinco gold is promptly immobilised by the Federal Reserve Board in pursuance of its policy of preventing any expansion of credit for use, directly or indirectly, in stock exchange speculation —a policy that has been carried to the extent of discouraging new issues of industrial securities. Ihe character of the situation may be judged from the suggestion, recently advanced in London, that large holders of American securities should realise their investments, incidentally profiting by the inflated prices, and by transferring the proceeds, support the sterling exchange. It has been authoritatively stated that any resumption of gold withdrawals from London lo America would make a further increase in the bank rate inevitable. If the action of the Reichsbank has been due not only to accumulated effects but also to a renewal of the American pressure, the latter may also be adversely felt in London, even to Ihe extent of realising that forecast.