FUTURE INTEREST RATES

Taranaki Daily News, 15 April 1935, Page 14

FUTURE INTEREST RATES

VIEWS OF PROFESSOR GREGORY. Much of the discussion of rates of interest assumes that some day the low rates attendant upon the depression will rise appreciably. A modified view is put by Professor T. E. G. Gregory, the British economist, who accompanied Sir Otto Niemeyer on his visit to Australia and New Zealand in 1930. He suggests that in Britain, where the population shows little change in numbers and is well provided with railways and houses, and little capital expenditure is consequently necessary, long-term rates of interest may be lower than rates considered to be reasonable before the depression. In: the British money . market there is also the uncertainty .of the- embargo on the export of capital, that is, the prohibition against the raising of foreign loans in the London market. This embargo involves an artificially low price for money in Great Britain. The present policy of the British Government is one of cheap money, but Professor Gregory concludes that the authorities will be ready to meet any improvement in the trading and industrial position by freeing the market from control. The effect of devaluation of sterling is also considered by Professor Gregory, who states that a return by Britain to the gold standard with less gold in the sovereign may tend to bring about a boom similar to what which followed discoveries of gold last century. Such a boom would cause the competition of borrowers to drive rates of inter-. est up,