BANK OF'ENGLAND RATE EIGHT PER CENT.

NZ Truth, Issue 772, 21 August 1920, Page 4

BANK OF 'ENGLAND RATE EIGHT PER CENT.

A Noto of Alarm, The cable announcement of an 8 per cent, bank rate is worse than any other financial news received since the war. It means that Britain te 'hard up, m a monetary sense. Under the old conditions Britain could always attract the funds needed for her commerce by the simple means of raising the bank rate. She could on the other hand, close down upon over-specula- ! tion by the same process of making "money dear." But the times are "out of jojnt," for Europe is bankrupt, France cannot send money to Britain's assistance as she did m past, times, for a consideration. All of the other foreign States are trembling- on the verge of collapse. Where then does the Bank o£ England expect to raise the money needed for the market? The answer is, m the Dominions making up the Empire. This explains the drain of New Zealand deposits pointed to m the recent review of the bank returns. It is not the rfational credit; of Great Britain that is m danger. It is the credit of the banking system that "ROCKS THE BOAT." The position is indeed serious. High bank rates 'have ruled 'before. In 1854-6 the rate went up to 7 per cent. That was caused by the Crimean War. In 1557 the Indian Mutiny and rotten American financial troubles forced the rate up to 10 per «3nt. It has never been higher. During 186 3 -4 the American civil war raged and the bank rate went to 9 per cent. Later on, namely, 1872-3, a German and American panic ensued following the movements toward a gold standard of currency. The x-ate m that case rose to 9 per cent. At all other periods, say, m normal times, the rate fluctuates between 2 and 3% per cent. These high rates are greatly the result of over-speculation. The recent -war was a bloody speculation, as all wars have been. Stock gambling, of which there has been an enormous amount m recent times, is another cause for high rates. The peaceful movements of genuine wealth production, m farming or manufacturing, hardly cause a ripple on the financial sea. In the latter case, the bank rate has gone as low as iy 2 per cent, and the people were contented. On July 22, Mr. Massey boasted m Parliament that our banks held m gold £7,807,2112, while the note circulation was only £,7,765,500. In doing so he used figures , that* were nearly four months old. He co^uld have told a different story, if either he or the Treasury, -wished the people to know the truth about this matter. At the time Mr. Massey was bulldosing Parliament the Treasury held the June quarter bank returns and from them he could have told the members that the banks had over-issued notes to the extent of £155,625. In other .words, the note circulation was £7,926,473 and the coin and bullion came to £7,740,848. Mr. Massey may fight for the six banks here, and he may discourage State banking all he knows how, but m doing either of these offices it is foolish of 'him to "trot out stale news" nbout the note circulation. The question now is: Will the Government hold our small stock of gold m this country and save it from going to London to bolster stock exchange speculations, commercial boodlers and war-mad politicians?