CHEAP MONEY.

Otago Daily Times, Issue 10423, 27 July 1895, Page 3

CHEAP MONEY.

TO THE EDITOR.

Sir, —Consols ab 107- deserve more than a | piissing notice. It means 127 for the old 3 per cjnta., and the prospect is within' measurable distance of 2 percent, becoasing the basal rate for Eugiish Government borrowing .instead of 3 per cent. This is due solely to the enormous accumulations of the English people. It may be that there has been some dearth of- safe securities during the past year or two, and that industrial1 and other enterprises have not been active enough to absorb what they used to do:; but the rise m value of the best securities is too general, the desire : for such investments too eager, to be accounted for otherwise than on the assumption that accumulations have overtaken and passed the reasonable requirements, and that the value of money has dropped to a permanently lower level of something like 30 per cent, as compared with a m&ttsr of ten or a doz-rii years ago. This means that £20,000 is 'no. bitter now -than £14-,000 then,1 or £40,000 tban £28,000, and'is a grave matter for many classes of the community; Bufc so long a3 it comes about gradually the change' is not seriously felt, and the public advantage in a country like England is very great. .:.'■ What does.it mean to this colony ? Nothing but good in every-way so long as we use the advantage wisely. Cheap money, means cheap power. Cheap money means dear land, and an impetus to all enterprise. But it also means that unless we are all of us careful to hold: the. position of bsiog able to borrow what we require on the best: terms we must be at a disadvantage.. The State which so manages its finance that its borrowing costs 3£-instead of 2£ per cent, has a handicap of 40 per cent, in the interest paid. The farmer, who borrows 65 per csnt. on his land at 6 per cent, instead of 59 per cent, at 5 per cent, has a handicap similarly of over 50 per cent, in the interest that he pajs; and if lie goes farther and borrows on his. stock aud wool he is very apt to place himself beyond the pale of any success whatever. It is not altogether a question; of what can be made out of the money borrowed. It is more one of being in the beet position as compared with all competitsrs.-' For if either a country or au individual fails to maintain this position', it is only a question of time wh»n the disadvantage wilr come home and forbd an adjustment. The present value of money snd Mr Ward's success in the floating of_ the last loan throw^therefore into somewKafc serious relief much, of our, previous borrowing at 4-, 5, 6, aud even 7 per cent, and there is every reason to suppose . that, >> long bofore the maturity of our ilast, loan ' our children will have much ths same contemptuous disbelief in the wisdom of thepresent generation in giving 3£ per cent, for money as we have to-day in our own financial geniua as exerciaed during the past 25 years. ■ '■'■'■''■':.■''* - The dangerous error which, I fear, is deep-1 rooted in these new countries is that money must bs .of some value under any circumstances, and, therefore, that if it is cheap it cannot be fur wrong to borrow and spend. It was only in the last century that most of those who had saved mouey stored is in the cafest place they coold githfgenerally with the goldsmiths—and. drew out what, they wanted from time to time, as one docs now from stores of food.. It is coming' very close to the seme stata of things now with' both the Euglish aud Scotch bank's, aiid while it is not likely that the present almost valueless condition of surplus cash will continue, or that we, shall not again see a very different state of thing's, still I suspect it is wise to reckon upon a permauently loweraverage level of iutareßt,andso to resist bsing tempfcad to increase our indebtedness, because of the belief that mibney.is at present unusually-and temporarily cheap. It is unwise to give way to borrowing becauss money is cheap. -Wisdom lies ,in .so-ordering our finances and our requireineßts;; aB to be able to command the very cheapest terms when a specific and wise .necessity impels us to borrow. If these, considerations have due weight both with Government and people, there can be no question'about |the definite advantages to the colony for some tima to come of the cheapening of the price of money.—l am; &o , '•• July 22;. ' ' - ■: vJ, MB