mm 1; wm '$, ism THE MONEY MARKET.

Otago Daily Times, Issue 12990, 3 June 1904, Page 4

mm 1; wm '$, ism THE MONEY MARKET.

We should be delighted if we could share with Sir Joseph Ward the opinion which lie has expressed in the course of the last few days that there is a tendency towards the cheapening of money in the colony. The market has eased to some extent at Home—in fact, to a considerable extent. But the flotation of the London County Council's five million loan some weeks ago hardly furnishes a. very convincing illustration, as Sir Joseph Ward suggests it does, thai.- the condition of the market has been changed from one of stringency to one of affluence. That loan was over-subscribed to a remarkable and unexpected extent, it is true, but itis affirmed by financial authorities at Home that the bulk of the amount that was applied for represented " stagging." In other words, the applications came in large measure from persons who were not genuine investors. It is not to be overlooked, cither, that tho Loudon County Council issued its loan at an exceedingly low figure, and the attractiveness the issue thus presented is, of course, responsible in no small degree for its success. Including redemption, the yield to the investor will, if the stock is repaid in 1920, bo at the rate of about i-3 19s per cent, per annum, and that is a high rate as first-class securities go in the United Kingdom. But Tho Times holds that it would bo entirely a mistake to suppose, because the flotation proved so successful, that the Finance Committee of the County Council made a mistake in fixing the price of tho issue as low as 90. It says: "If those who advocated higher prices (92 and even 94 were, we believe, suggested) had succeeded in getting their views adopted, there would liavo been no rush for the loan; there might even have been a fiasco, for municipal finance is not regarded with approval by the class of capitalists who have made the present issue a success, and it was to make the loan attractive." The significance of this for colonial Governments consists in the fact that their issues _ are generally' looked upon by money-lenders at Home in very much the same light as the best of tho municipal loans in the United Kingdom. And it is a symptom of this that though the market in Australasian Government securities lia-gj in sympathy, with

the general tendency in Great Britain' towards a relaxation of the stringency that existed for months, certainly improved, it has not participated to any great extent in the recovery that has occurrcd. Nor has the influence of the easier market at Home yet made itself really perceptible in this colony. As the New Zealand Times, which associates itself with Sir Joseph Ward in the belief that a period is to be anticipated in which money in the local market will be more plentiful, has pointed out, the natural effect of the prevalchce of high rates in London is to attract remittances thither, and conversely tho effect of a cheapening of money at Home is that outlets are sought for it elsewhere. Consequently, our contemporary adds, a. continuance of low rates at Home may be said to presage an. easier market in Australasia. In general terms, of course, the proposition that a plethora of money in London will cause an overflow to other parts of the world where there is a demand for it is obviously sound. There is, however, one qualifying circumstance to be observed. Money, like other liquid commodities, when released from confinement in any particular place, follows the line of least 'resistance. It will not flow to Australasia if a. more favourable outlet for it offers elsewhere. And the Australian Insurance and Banking Record is impressed with the conviction that there is a special reason why there should be a want of elasticity in the market for Australasian stocks. Tho cause is found by it in " the partial disfavour into which Australia has fallen in consequence of legislation that- appears to the ordinary Britisher to be crude and erratic, if not dangerous." If, however, the legislation 'of Australian Parliaments lias caused capitalists at Home to look askance upon the securities of State Governments in the Commonwealth, it is only reasonable to suppose that issues from New Zealand, which has gone to greater extremes in its legislation than any Australian Parliament has clone, will bo similarly viewed with a certain amount of disapproval. Whether that be so or not, we are certainly without proof that any tendency towards a cheapening of money in this colony, such as would follow an introduction of surplus capital from abroad, has lately manifested itself. Believing as we do, and as every person who is engaged in commercial undertakings must believe, with Sir Joseph Ward that there can be nothing worse for a young colony like this than to have dear money, it would afford us great pleasure to accept, if we could, the assurance of the New Zealand Times that easier rates prevail in the colony than those obtainable a- few months ago. The fact is, however, that the market quotations simply do not support such a statement. Our Wellington contemporary itself admits that bc-st mortgage rates are about U. pc-r cent, higher than they were twelve months ago. That statement in itself constitutes a contradiction of the main argument which the New Zealand Times seeks to establish. As a matter of fact, we understand, money is being freely borrowed in Wellington at 5 per cent, and at as high as 5J- per cent, upon mortgage security, and in face of that- circumstance it is possible to ovc-r-estimate the importance of the announcement that "4 per cent, is now tho highest rate obtainable for twelve months' deposits in investment, building, and mortgage companies." It is with the greatest heartiness that we join with the New Zealand Times in acknowledging the praiseworthy steadiness with which the banks that do business in the 'colony have resisted the tendency towards an advance in the money rales, and we shall have much pleasure in acknowledging the prevalence of easier conditions when they reveal themselves in any appreciable degree. At the present time, however, the colony is without the precise proof which is desired that a period of diminished stringency has actually commenced.