NEW YORK MONEY CHEAPER

Taranaki Daily News, 22 November 1929, Page 9

NEW YORK MONEY CHEAPER

SLOWING DOWN OF BUSINESS. EFFECT OF STOCK CRASH. (From Our Own Correspondent). Wellington, Nov. 20. The crash on the New York Stock Exchange was evidently much more serious than could be gathered from the cable messages bearing on the subject. The crash itself was due to the over capitalisation of future eatpdlngs, q,o much so that the returns from many concerns were down to 2 per cent. This was one factor in the situation, but the more important matter has been that since the beginning of the second half of the year business has slowed down. Thus, fo; instance, ‘building operations which have been of immense influence in mass production showed considerable falling off. The United* States Steel Corporation, according to the Iron Age, was in need of new business, and the motor industry was also curtailing operations. The New York slump is most likely to accelerate this slowing down process. To help restore the position Congress is to be asked to make some taxation reductions, and the New York Federal Reserve Bank has hastened to . reduce money rates, the rate of that institution now being 4% per cent., which is the rate maintained by the other 11 Reserve Banks of the country. The immediate effect of this reduction was to see shares advance sharply, but there is little likelihood of the previous speculative craze reviving. The New York rate is now 1% per cent below London, and that should result in the transfer of funds from New York to Europe and therefore a big demand for sterling exchange. As a matter of fact, as soon as the Bank of England rate was raised to 6'/ } per cent, the exchanges moved in favour of London, and if the Bank of England rate is not further reduced sterling exchange will reach the gold point and gold will recross the Atlantic. The Bank of England gold reserve is well below the minimum rate fixed by the Cunliffe Commission, and it is therefore unlikely that there will be much of a reduction in the rate. Possibly the bank, rate will be reduced this week by i per’ cent., bringing it down to 5% per cent., but it is not likely to go below that until- there is greater clarity. Then there is the setting up of the International Settlement Bank, which will involve transfers of gold from various points in Europe to Switzerland, where the headquarters is to be located. Comparatively high money rates are likely to rule for the balance of tho year. Cheap money in London would be a relief to Australia, as the Commonwealth Government is in need of funds which are difficult and costly to obtain in Australia. In addition to these difficulties the decline of values in produce is hampering domestic trade. The out? look for 1930 is &aid to be causing some anxiety to the merchants in the Commonwealth, w!ho ar© redivintg stocks as much as possible in view of the probability of limited business. The woollen mills on the other side have found it necessary to reduce prices 7 to 10 per cent, and are doing business with retailers'on a basis.'which is resented by the merchant's?