GOVERNMENT LOANS

Otago Daily Times, Issue 21600, 22 March 1932, Page 5

GOVERNMENT LOANS

NATIONAL CREDIT HONOURING CONTRACTS STOCK EXCHANGE ALARMED Strong representations have been made to the Prime Minister and Minister of Finance by the Wellington Stock Exchange in regard to the difficulties the country has to face, and more particularly to one saving which it has been suggested should be effected, namely, that the Government should violate its contract to lenders by reducing the return to internal lenders who have invested in Government loans. The chairman (Mr E. Bucholz) informed the Minister concerned that “in expressing an opinion to you we may only be repeating what has already been said, but we are impelled, nevertheless, to do so with the firm conviction that no body is better able than the Stock Exchanges tj forsee the effects of such repudiation. Whether this be done by volnntary or compulsory conversion, stamp duty on coupons and warrants, or other form of taxation on one section of the-people, we fear the result. THE GOVERNMENT GUARANTEE. “ May we premise our argument, which we have reason to believe is supported by pur associate exchanges, by saying that, in the past, Government loans or loans carrying the guarantee of the Government, have always held the lead in the estimation of the public. Members of our exchanges have never hesitated, when asked for investments of the soundest security, to recommend, first of all, bonds and stocks of the New Zealand Government. They have felt, in investing their clients’ moneys in such funds, that the future income is assured beyond question, and that the capital is safe so long as a responsible Government exists on these islands. Therefore, we most respectfully beg that .nothing be done which will in any way impair the most excellent regard in which New Zealand Government leans have always been held.

“We appreciate the great difficulties •which you, as custodians of the nation’s good name, are faced .'with. On a previous occasion the Stock Exchanges were privileged to express an opinion on this subject in the form of answers to a questionnaire issued by the Prime Minister, and the Wellington Exchange then said: — Such a solution of present diffictii- ' ties should only be applied as a very last resource and out of dire necessity. “ May we now define the term * dive necessity’ Our meaning was and still is ‘ necessity arising after every other source of revenue has been drained to the utmost drop.’ These are strong words, but we use them with a full sense of their import. “ FEARFUL OF RESULTS.” . “ We have such a respect for the good name of New Zealand, and are so fearful of the results which we feel will undoubtedly follow any breach of contract that we do not hesitate to put our views in the strongest terms. We submit that, as .a young, growing country, New Zealand must have at its disposal loans from the public, both the New Zealand public and the overseas public. In the past the credit of this Dominion has stood high' in the money . markets. Let us maintain that high standard, no matter how we may be pressed, and no matter what other dominions may do. We are convinced that a happy issue from our present troubles will then be hastened, and pur credit will excel its former high standard. u

i: “ We appreciate that equality of sacrifice is fair and desirable, but we do not agree that the suggestions made by the Economy Commission, as affecting interest payments, will make for such equality of sacrifice. On the contrary, we submit, with all respect to the members of the commission, that such action, if taken by the Government, will mean that thrift and hard work are penalised. Not only will the investor suffer a loss of interest, but the market for Government securities will record a further sharp decline. Thus the investor who, by force of circumstance, has to realise will suffer a considerable capital loss. The buyer, on the other hand, will reap a good profit on redemption, while those present holders not forced to sell will suffer no loss., ' There is no equality of sacrifice here. The effect of reduced interest will be so far-reaching as to embarrass the ■ Dominion for many years, and place a stigma for all time upon New Zealand. EXAMPLE OF ENGLAND,

“ England, it would appear, is about to weather the storm with credit to her statesmen. We are convinced that you can do the same.

“We have avoided all figures in our representations. At best we could but repeat departmental statistics already familiar to you. But this question, we submit, is not entirely one of figures. More important is the maintenance of national credit, and, as we have said, our members are really alarmed at the consequences in the immediate and the distant future, if the sanctity of national contracts, is sacrificed. Our plea is that our security, which has always been regarded without the faintest suspicion, be safeguarded. We would add that a pronouncement to this effect made at the earliest possible moment would do much to re-establish confidence among those with money to lend.”

DUNEDIN STOCK EXCHANGE WELLINGTON’S APPEAL SUPPORTED. The Dunedin • Stock Exchange, according to a statement by the chairman (Mr Harman Reeves) fully supports Wellington’s appeal to the Government not to interfere with the rates of interest paid on Government loans.