The New Zealand Times. MONDAY, FEBRUARY 9, 1920. WORLD FINANCE

New Zealand Times, Volume XLVI, Issue 10508, 9 February 1920, Page 4

The New Zealand Times. MONDAY, FEBRUARY 9, 1920. WORLD FINANCE

So far as Great Britain —and this, of course, affects the British Empire as a whole—is concerned, the tension of ankiety with regard to the present position of world finance is materially relieved by the cabled report of tho interview of the “'New York Sun’s” London correspondent with -Mr (Reginald McKenna. At one time British Chancellor of tho Exchequer, Mr McKenna is entitled to speak with no little authority on financial matters. He knows what he is talking about;, and when he tells us ’ that, “There would not be an adverse British 'balance of trade if England were nob selling goods on credit in order to help restore Europe,’’ we may he very certain that this is the true position of affairs. It is, in short, very much the same now as during tho war period. Great Britain’s unexampled financial strength enabled her, throughout tho greater part of the war, to bear not only the whole burden of her own war finance, hut also that of the Overseas Dominions and of the Empire as a whole; and the breaking strain, the need for financial assistance from tho United States and for the Dominions to raise as far as possible their own war loans, came only because England had also to shoulder in vory largo part the burden of the war finance of all her European Allies. So to-day, Britain after the war is well able to carry tho whole of her own co'ossal burdens. She is, indeed, so enormously strong financially that she could safely stabilise as well tho finances of tho Overseas Dominions and of India, to say nothing of tho minor dependencies of the British Empire; and, to-day, again, trouble only arises—or rathet, a temporary adverse balance of trade only makes itself manifest —because England, as great-hearted as she is strong, / is shouldering also the burdens of her neighbours, “selling goods on credit in order to help restore Europe.” Britain is doing this, as My Lloyd George recently indicated, not merely to restore tho financial position in Europe, hut also in order to encourage trade as an antidote to Bolshevism in Russia, and as a safeguard against such widespread unemployment and privation as' might result in an epidemic of Bolshevism, like a death-dealing pestilence, throughout the rest of Europe; perad venture, throughout tho whole world. Mr McKenna’s cabled statement' very strongly boars out, or is borne out by, tho view of Britain’s trade position given by Mr Harold Beauchamp (chairman of tho Bank of New Zealand), in an interview tho day before with a “Times” representative. While tho “adverse balance” on Britain’s trade for the • current year is nominally £750,000,000, Mr Beau-

champ pointed out that in this estimate no account was taken of the Mother Country's invisible exports—the earnings of her shipping, computed at something like 300 to 3.50 millions a year; and that nothing had 'been allowed lor her interest on overseas investments, which may still bo reckoned at 150 millions sterling. These two items alone reduce Britain’s adverse balance from 7-30 millions to only 200 to 250 millions a year—quite a manageable deficit. But there is the further consideration that while British exports arc quoted “f.0.b.” (free on hoard at British ports), England’s imports from foreign countries are quoted “c.i.f.,” that is to say, with commission, insurance, and freight added. If this were allowed for, as it certainly ought to be, the apparent deficit might well he reduced by a further £100,000,000 to £130,000,000, leaving only the comparatively small adverse balance of 100 to 130 millions duo to Britain’s ‘’selling goods on credit in order to help restore Europe. ’ Such figures aro necessarily approximate only ; but this analysis of the position makes it abundantly clear that there is no reason whatever to fear for Britain’s financial position. Her financial strength, manifestly, is as great as, if hot greater than, before tho war. Up to the present, as Mr Harold Boa nob amp stated on Thursday last, “through the magnificent credit which Great Britain has enjoyed, ghc has had no difficulty in procuring all the goods from America that she rc-

quires.” Air AlcKenna’s statement that “America is in the right in refusing to lend money to Governments which liavo not put their onm house in order,” dearly implies that Britain, hy putting: her house in order, mil continue to deserve the magnificent credit she has hitherto enjoyed; and, not only that, but, says the ex-Chancelior of the Exchequer, ‘•'England mill prove that she i s milling to do her share in restoring industrial life mhere it has collapsed iu Europe.” As to Britain's own present and future prospects, Air McKenna added—“ Britain’s output is very good. The labour situation in Britain is less threatening than in any of the other leading countries of the world. There is no ground tor fear of any decline iu Britain’s mercantile marine power. Competition in trade between England and the United States exists, hut only friendly competition.” As a matter of fact, so far as trade relations arn concerned, Britain is no less necessary to the United 'States than tho United States is to Britain. Neither can do without the other. And the same is broadly true in regard to tho trade relations of America with tho Continent of Europe ;vs a whole. Tho United States can afford to lot neither Britain nor the Continent go bankrupt, because tho inevitable reaction from such bankruptcy would go far to bankrupt America herself. This is clearly indicated by the panicky condition of tho Now Fork Stock Exchange the other day, when tho sterling rate reached tho unprecedentedly low level of 3 dollars 191 cents, recovering later to 3 dollars *25 cents. The stock market, me are told, reacted sharply, and virtually all issues sold at large losses. Cotton fell off 25 to 100 points on the report that Britain hud stopped all cotton imports. American exporters, it is added, be. lieve that it will foe necessary for England and France to release large gold stocks 'before the exchange market can ho stiffened; and the London “Daily Express” is reported to have appealed to everybody to surrender gold ornaments, plate, and jewellery, in order to liquidate the debt to America and restore tho exchange. But for Europe to export gold to America 'can only temporarily oaso the situation. A largo surplus of gold would bo only less embarrassing to the United States than a largo surplus of paper money. This was demonstrated during the war, when America practically begged England to send her no more gold, hut to accept huge loans instead. Upwards of 90 per cent, of tho trade of the world is done on paper. To a very large extent it ig a more matter of book-keeping. Gold is used mainly for the purpose of temporarily adjusting international trade balances; and with, such huge -adverse balances as have new to bo made good, tho whole of tho gold iu the world could nob for long go very far towards adjusting matters. Austria has given xis an object-lesson—though on a very small scale, ft is true—as to how these balances can he best adjusted. “Twenty-live Austrian manufacturers,” states a cablegram, “have arrived in London, bringing £50,000 worth of goods. The money obtainable for the goods will be used to purchase British raw material, which Austria needs. This process will overcome tho exchange! difficulty.” Wliat theso- Austrian manufacturers have done on so small a scale, Britain and Europe as a whole must do on tho greatest possible scale. Labour and capital must both loam wisdom. They must pull together for tho common good. Production must bo enormously increased, and the colossal debts loft by tho war must he paid in goods. Thus only can tho rates of exchange ho rectified, and universal bankruptcy bo averted. Already a British Financial Conference has mot to consider the position, and is recommending tho calling of an international conference; and that tho United States is prepared to do her part is, wo think, shown by the fact that Senator Thomas, declaring that tho exchange situation is seriously threatening America’s export trade, has introduced in tho Senate a resolution to create a monetary commission to confer with similar commissions from other nations in an attempt to stabilise the moneys of the world.