CHEAP MONEY

New Zealand Herald, Volume LXIX, Issue 21315, 17 October 1932, Page 8

CHEAP MONEY

A week of activity on the London Stock Exchange, with gilt-edged securities at almost record heights, has produced the forecast that before long British funds will be on the basis of a 3 per cent yield to the investor. The recent and brilliantlysuccessful issue of 2 per cent Treasury bonds has been quoted as the precipitating cause of this new boom in funds, but the possibility of Government long-term securities touching such a level was predicted over a month ago. The results hoped for from such a development were mentioned by Mr. Neville Chamberlain in his statement at Ottawa on monetary policy. The official resolution had emphasised the desirability of an abundant supply of short term credit at cheap rates. Supplementing this Mr. Chamberlain said: "What we all desire is to see trade again in an active position and traders taking advantage of the monetary facilities offered to them. In this connection nothing is more useful than a substantial reduction in the long-term rate of interest to supplement the fall in short-term money rates. The conversion scheme for the 5 per cent war loan, and the great public enthusiasm with which it has been received, have placed British gilt-edged securities on a 3£ per cent basis and it should not be long before the advantages gained by the gilt-edged borrower spread over into other fields of investment." The spread of the benefit is what is most eagerly anticipated and most required. Opinion in London even before these latest and most marked developments was that the stage was set for a general upward movement in industry as well as in finance. "Altogether we can claim to have reached the primarily comfortable period where the economic system is. indeed, in great idleness, but not in any danger," was the way it was put. On that basis this is the period of waiting before the first impulse that should speed the process of recovery. It seems long in coming after all the necessary conditions have developed, but for the upward climb to be slow though the descent to depression was rapid is characteristic of these trade movements.