AMERICAN FINANCES.

Taranaki Daily News, 13 January 1932, Page 6

AMERICAN FINANCES.

To hear simultaneously of the approaching insolvency of four of the principal cities of the United States and of the determination of certain Latin-American countries to transfer their gold holdings from London to New York is further proof of the difficult and restless conditions which obtain in current economic history. So far as the withdrawal of gold from London is concerned the action is probably not due to any fear of Great Britain’s stability but because of the hope that credits will be more easily •obtainable by South American States in New York than in London. Great Britain is at present conserving its resources, and in the process is limiting willingness to lend to any country desiring a loan. Even the Dominions have been warned that applications for accommodation must be withheld in the meantime, and are shaping their financial policies accordingly. In the United States gold reserves are known to be larger than ever, and as the South American Governments are frequently borrowers they are removing their bank accounts to the institutions they consider will be most likely to give them further loans if requited. The position in the four cities of the United States is the old story of profligacy come home to roost. New York, Detroit, Philadelphia and Chicago are all said to be approaching insolvency. While this, no doubt, is a far-fetched expression, it seems obvious that the price of many years of municipal extravagance has now to be paid. Easy borrowing is at an end. Unemployment is an appalling menace, for in all these huge communities there is a vast section of society that is ever “near the bread line” when things are normal. When depression occurs their position becomes almost desperate, and revolutionary forces are ever ready to take the opportunity of arousing class hatred. Hence the “extravagantly overspent” schemes of relief of which the financial institutions that have provided the cities’ loan money are now complaining. They, see no hope of a revival of trade while the Republic’s trade policy remains that of a seller to other nations and not a buyer of their goods in return, and they realise therefore that expenditure upon unproductive relief works will but foster rather than cure the evil they were intended to eliminate. It is a lesson to be learned also nearer home, and the sooner the better. When, as in the United States’, actual corruption is added to municipal misguidedness it is little wonder that lenders have called a halt in city extravagance and folly.