COMMERCIAL

Taranaki Daily News, 19 August 1929, Page 16

COMMERCIAL

MONEY IN AMERICA.

CREDIT AND SPECULATION.

REACTION NOW SET IN.

’• HIGH INTEREST RATES.

(From Our Own Correspondent.) Wellington, Aug. 14.

For a long time the Federal Reserve Board of the United States has been endeavouring to check the intense gambling that has been in operation on the New York Stock Exchange, but with very little success. Towards the end of 1927 the Federal Reserve Bank of New York reduced its rate to 3J per cent, and the object of cheapening money was to help Europe to recover and expedite currency deflation. There was thus made available in the United States an abundance of credit, and this credit expansion was much in excess of commercial requirements, and naturally overflowed into the stock market;-. That started the speculation in New York, which increased in intensity as prices advanced, and huge profits were made overnight. The Federal Reserve authorities became alarmed, and raised the rate to 4 per cent, then to 4£ per cent., and finally to 5 per cent. These movements failed to cheek the speculation, which became nation-wide, and call money on the New York Stock Exchange fluctuated between G per cent, and 20 per cent. These high rates, instead of crippling the speculators, rather helped to maintain the fever, for money poured in from all sources, including foreign countries, to take advantage of the high interest rates. There have been numerous breaks, but the speculation soon revived. Thus on February 7 last the Bank of England rate was raised to 5J per cent., there was a repercussion in New York, for the Federal Reserve announced a stringent policy of credit curtailment. But the slump was only a temporary affairs, for on March 1 there was what was -what was described as a “Hoover inaugural market,” a sensational “bull” demonstration being staged with advances in many instances of 15 per cent, to 25 per cent. On March 15 there was another sensational rise in share values. On March 25 call money in New York soared to 14 per cent., rising to 20 per cent, the following day. The stock market crumbled under the avalanche of selling orders, and sales for the day totalled over seven million shares for the first time in the history of the New York Stock Exchange. Since the call money rates have oscillated between 6 per cent, and 15 per cent. On August 1 the rate was 12 per cent.

Now the Federal Reserve Bank of New York has raised its rate to 6 per cent., which makes money unusually dear in New York, and the rate is A per cent, above Bank of England rate. It will be very necessary for business people to keep a very close watch upon the movements. Last year, although the Bank of England rate at cent, was J per cent, below New York, it was able to carry on quite easily; indeed the dollar exchange was in favour of London, and the bank was able to strengthen its gold reserve. It is evidently the belief of the governor of the Bank of Eng,and that at present there is no need to alter - the ■ rate, but al! will depend on the rate of exchange. On August 9 it was 4.85 dollars to the £. The gold point is calculated at 4.54 828 dollars, so that if the rate declines another half per cent, gold will leave London for New York.

The position must be one of extreme | anxiety for the central banks of Europe,! and particularly the Bank of England. It is a favourable factor that the bank rate has not gone up, notwithstanding the heavy loss of gold by the bank. Mr. Reginald McKenna, chairman of ; the Midland Bank, the biggest of the “Big Five” in Britain, remarked recently that the bank rates determined within fairly narrow limits the rates for short term money, and before the war generally regarded as a Reliable guide to the suitability of existing conditions for making long term issues. But whatever its validity in pre-war days, it was not now so significant. For many months past the high call rates in New York had influenced —he might say almost dominated —the money market in London, and most other important financial centres. In consequence, no man careful of his reputation had been willing t > venture a prophecy as to monetary conditions even a short time ahead. The unknown factor —the duration of the American speculative boom —had outweighed all ordinary data on which any judgment could be formed. What the next few weeks or even days may bring forth it is difficult to say, but one thing is obvious, and that is that monetary conditions in the Northern Hemisphere will be stringent for the remainder of the year. The usual autumn demands will begin next month, and as things stand at present, that is if money is cheaper in London than in New York, a great deal of the financing will fall upon London, but that will be profitable business. What the Bank of England authorities will seek to avoid is raising the rate and making money dear and thus hindering trade. The bank, however, may be forced to take action to protect its gold reserve, and those who desire to keep in touch require to keep a close watch on the foreign exchangee. The situation is so uncertain that a little caution will not be amiss.

BUSINESS OF SHARE MARKETS. Auckland, Aug. 17. —Share- market sales: Gonville Town Board. 1940, 5} per cent., £99; Farmers’ Trading Co., 9s 4d; Waihi, 12s 2d. ■Wellington, Aug. 17. —Reported sale: British Tobacco Company of Australia. (ord.), 48s 6d. Christchurch, Aug. 17. —Sales on Exchange: Carlton Brewery, £47 10s; Mt. Lyell, 445, Reported sales (late sale yesterday): National Bank of New Zealand, £6 19s fid. HIDES AND SKINS SALE. PRICES AT WELLINGTON. There was a large attendance of buyers at the hides and sheepskins sale on Friday. Brokers report that competition was animated, and sheepskins maintained last sale’s level for both dry and salted lots. In the hides market prices showed a little easier feeling for cows and heavy weight ox, but values for light and medium weight ox were fully maintained. Tallow sold at last sale’s level of prices. The range of prices was as follows:— Dry sheepskins: Halfbred, 12%d; fine crossbred, lOd to 12-L1; medium crossbred, 9y a d to 11 |d; coarse crossbred, 9d to ll%d; half wools, 7%d to ll%d; quarter wools, 84d to 10£d; pelts, to 10 %d. Salted skins: Quarter wools, Gs 2d; half wools, 6s 10d to 8s; three-quarter wools, 7s to 9s 3d; full wools, 8s to 10s 7d; extra large, 10s lid; lambs, 4s 6d to 5s 4d, Hides: Ox, 331 b to 441 b, 7d to 7‘Z>d; ox, 451 b to 521 b, 6 7-Sd to 7>}d; ox, 531 b to 591 b, G 7-Sd to 8 l-8d; ox, GOlb to 691 b, 7 5-Sd to B.{d; ox, 701 b and over, 4d to 81d; cow, 331 b to 391 b, G 7-Sd to 7id; cow, 40’lb to 481 b, 5%d to 7 5-8 d; cow, 491 b and over, 6d to 7d; kip, 251 b to 321 b, Gd to B%d; kip, 171 b to 241 b, Gid to 9’/,d; yearling, 111 b to IGIb, 9%d; calf, 91b “to 101 b, 9d to 9%d; calf, 61b to 81b, lOd to 13id; calf, 11b to 51b, 7 1 />d to 12id. Tallow: In casks, 275; in tins, etc., 22s to 28s, Sundries: Cow tails, 14’/ 2 d to 20d: horse hair, 17d. LONDON MARKETS. COTTON, RUBBER, JUTE, ETC. By Telegraph—Brass Assn.—Copyright. Received Aug. 18, 5.5 p.m, London, Aug. 17. The latest market quotations are: — Cotton. —September shipments, .9.GOd per lb. Rubber. —Para, lid. per lb; plantation smoked, 10 5-16 d. Jute. —August-September shipment, £32 10s per ton. Hemp.—Unquoted. Copra.—'September-October shipments, £2l 17s Gd. Linseed oil, £37 5s per ton. Turpentine, 42s 6d per cwt. Osmiridium is unchanged. PRICES OF FROZEN MEAT. LATEST SMITHFIELD QUOTATIONS. By Telegraph—Press Assn. —Copyright. Received. Aug. 18, 5.5 p.m. London, Aug. 17. Smithfield quotations are: — Sheep.—Australian ewes, 4%>d per lb; Patagonian, ewes, none offering. Lambs.—Canterbury, seconds, 7 7-Sd per lb; North Island,' firsts, light, 8 I-8d and 7%d; seconds, 8 l-8d; Patagonian, firsts, light, 7|d; medium, 7d; seconds, 7 5-Bd. Other classes of meat unchanged.