CHEAP MONEY AND TRADE

New Zealand Herald, Volume LXX, Issue 21503, 29 May 1933, Page 8

CHEAP MONEY AND TRADE

The cheapness of money in London is emphasised again by the creation of a new low record for the sale of Treasury bills. There is an allotment of these every Friday, and as a rule they are competed for eagerly as the most easily negotiated and therefore the most convenient form of short-term security for use in the complicated and never-ending transactions by which the City of London lives. The keener the demand, the lower the rate of discount at which these bills are placed. The cable messages describing the transactions at this weekend speak of sales at £99 18s 4d, meaning that for the loan of that sum for three months the Treasury pays Is Bd. It is not necessary to labour the point of abundant money being available for shortterm investment at phenomenally low rates. There has been evidence of it for months past, with consequent influence on long-term rates, as exemplified by the price of securities in the open market. It is an axiom in finance that an important condition precedent to recovery from depression is a prolonged period of cheap money. Until recently the records for low rates of interest and discount were all to be found in the years following what is commonly known as the "depression of the 'nineties." One by one they have been equalled or excelled in a little over a year past. The period of cheap money is firmly established in London. To those outside the charmed circle of high finance there is little beyond academic interest in cheap money itself. The trade recovery which is expected to follow such conditions is, on the other hand, the most eagerly . awaited development that could occur. It is a happy circumstance that tho renewed evidence of. the cheapness of money, provided by the Treasury bill issue, coincides with news of increased activity in industrial stocks on the London Stock Exchange, based on optimistic reports of actual industrial expansion. An authority of soijie weight, and one not noted for easy optimism—tho Economist —says : " There is more than politics behind the recovery." With all the necessary reservations made, associating the industrial stimulus with cheap money justifies the hope that it is more than a flash in the pan, that ft is indeed the beginning of eagerly awaited recovery.