CHEAP MONEY

New Zealand Herald, Volume LXXIII, Issue 22525, 16 September 1936, Page 9

CHEAP MONEY

INFLUENCE ON TRADE "can be Over-estimated" MARKET RATES MAY RISE The revival in trade and industry has been associated with a period of cheap money conditions and many Governments are anxious to maintain a favourable borrowing market. It is, in fact, the expressed intention of the New Zealand Government to keep interest rates low. '

Discussing the position in Great Britain, the monthly review of Barclays Bank states that, although the part which monetary policy has played in the recent recovery should not be minimised, it would bo unwise to overestimate the value of cheap money as a stimulant to trade. Credit expansion, so far as it has been allowed in this country, has been an orderly expansion, judiciously managed, but any exaggeration in the public mind of the powers of the authorities to influence by monetary manipulation the trend of industrial progress might result in agitation for exceptional measures with the possibility of injurious inflation. There is also a danger that if the influence of low interest rates on trading recovery is over-rated, moderate changes either upward or downward may be given an undue importance in assessing industrial prospects. Nor should it be overlooked that, in times of abundant credit; "boom" conditions in security prices and new capital issues frequently arise with ultimate unsatisfactory repercussions on trade and industry.

Should cheap money be carried to extreme lengths it may tend to injure the smooth working of the financial organisation on which the trade and industry of the country so greatly depend. After a long period of exceptionally low rates for short-term money, ideas as to what is cheap and what is dear money may become distorted. A review of conditions over a long period of years would, however, serve to show that money market rates could bo raised very considerably above the present level and still be relatively cheap. Neither need a rise in short-term rates cause a corresponding rise in those for long-term borrowing, as the factors affecting them are not necessarily identical and, at times in tho past, longterm rates have been lower than those for short-term financing. Tho ideal position, as far as trade and industry are concerned, is that there should be no stringency likely to hinder the day-to-day commercial business of the country or sound industrial development. In the long run, the latter will depend on the ability and -willingness of investors to save and one of the factors most likely to encourage the accumulation of capital is a fair return on investments having regard to the prevailing circumstances and the risks involved.

TRADE OF BRITAIN IMPORTS AND EXPORTS INCREASES IN AUGUST LONDON, Sept, 34 The Board of Trade returns for August show that imports into Britain were valued at £66,057,087, compared with £59,145,107 in • August, 1935, an increase of £6,911,980. The value of exports was £35,258,115, compared with £34,882,955, an increase of £375,160, and of re-exports, £4,355,909, an increase of £170,348.

Tho principal increases were:—lmports: Grain and flour, £1,161,000; dairy produce, £347,000; beverages, £462,000; wood and timber, £440,000; iron ore, £313,000; cotton and raw waste, £1,677,000; iron and steel, £416,000; oils and fats, £417,000. Exports: Vehicles, £413,000. The chief decreases were:—lmports: Fresh fruit and vegetables, £832,000; rubber, £630,000. Exports: Coal, £414,000; irton and steel, £391,000.

Following is a comparison of the returns for August of the last three years:—

' Imports Exports He-exports £ eC £ 1034 . . 00,027,050 32,000,009 3,301,607 1035 . . 50,145,107 34,882,055 4,185,501 1936 . . 00,057,087 35,258,115 4,355,009 The apparent adverse balance in August, 1934, was £24,635,444. It decreased in August, 1935, to £20,076,591. Last month the excess of imports over exports increased to £26,443,063. Corresponding returns for periods of eight months are:—

Imports Exports Re-exports £ £ £ 1934 479,411,259 225,089,324 30,431,359 1935 470,001,872 277,730,051 30,713,709 1030 537,580,435 283,233,504 41,753,808

The apparent adverse balance for the first eight months of this j'ear is £212,602,003, compared with £164,611,212 in 1935 and £217,923,576 in 1934.

PRICES OF METALS SHARP RISE IN TIN (Received September 15, 7.35 p.m.) LONDON, Sopt. J 4 Following are to-day's quotations on tho London metal market, compared with those of September 10: Sept. 14 Sept. 10 Per ton I'er ton £ 8 (1 £ 8 d Copper, stan., spot 30 5 O 38 11) 4% Copper, stan., 3 mos. 30 8 1% 30 4 4y, Copper, olectrolytic 43 10 O 43 0 O to to 44 0 0 43 10 0 Copper, elect., wire

bars . . .. 44 0 0 43 10 0 Lead, soft., spot .. 18 6 3 18 5 0 Lead, spot, forward 18 5 0 18 5 0 Spelter, spot 14 6 3 14 5 0 Spelter, forward . 14 11 3 14 10 0 Tin, stan., spot .. 108 5 0 195 12 6 Tin, stan., 3 mos. . 104 7 6 192 7 G

GOLD AND SILVER QUOTATIONS IN LONDON (Received September 15, 7.35 p.m.) \ LONDON, Sopt. 14 Fine gold is quoted to-day at £6 17s 5d an oz., compared with £6 17s 6d on Saturday. Silver is quoted at 19 5-16 d an oz. spot and forward, compared with 19Jd, both positions, on Saturday. Tho quotation for silver at per fine oz. is 21d, compared with 21 l-16d op September 10.

The following is a summary of the fluctuation in the price per ounce of fine gold this year:— £ s d Highest prices, January 2 .. 7 14 Lowest price, Sept. 14 ~ 617 5 September 8 . .. .. 617 10% September O . .. ..617 5% September 10 .. <5 17 7 1 / ? September 11 . .. 617 0y 3 September 12 . .. .. 6 17 6 September 14 . .. ~ 617 5