The Timaru Herald. WEDNESDAY, JULY 27, 1932. BRITAIN’S KEY MOVE.

Timaru Herald, Volume CXXXVII, Issue 19245, 27 July 1932, Page 8

The Timaru Herald. WEDNESDAY, JULY 27, 1932. BRITAIN’S KEY MOVE.

“Nothing lias been more striking in recent weeks,” Sir John Simon, Chancellor of the Exchequer, wrote to Major-General Sir John Seely (who organised the conversion loan campaign), “than the impression this bold conception has made on the minds of other countries.” This Ministerial pronouncement followed the presentation of an official statement to this effect:

Over £1,000,000,000 of the 5 per cent. War Loan has already been converted to 3J per cent, under the Government’s conversion scheme. A statement to this effect made by Major W. E. Elliott (Financial Secretary to the Treasury), who also mentioned that of 2,600,000 holders of this stock, 1,587,000 had up to the present assented to conversion. The dissenters numbered only 115,000, representing only 2 per cent. This meant that £9B of this stock was being converted for every £2 that was not. The finances of the Old Country have been arranged on such a perfectly balanced basis, that financial writers are emphasising that both conversion and purchase of conversion are sound business propositions, as the chances of hardening money rates are remote. This is the more important because the whole gigantic transaction proves, if proof were any longer required, the soundness of British methods of finance. In face of enormous difficulties, Britain restored her Budget equilibrium and in other courageous and almost heroic ways, strengthened the confidence of the British and other investors in gilt-edge securities. Having thus prepared the way for reduced interest charges, which came with the almost sensationally rapid fall in the London bank rate, the psychological moment arrived—and the most businesslike moment, too—for the launching of the campaign to remove the great obstacle of 5 per cent, stock, which was checking (he fall in the rate. It is worthy of note that when the conversion operation is complete the improvement will be permanent and it will have been made (and this is important from the point of view of the country’s credit), without any breach of faith with lenders and without a blow to confidence. The Financial News discerns a fundamental difference between the British procedure and the Australian conversion. The Australian plan was an appeal for sacrifice for the good of the State (with the threat of compulsion in the background). Sacrifice is highly laudable, but it is not the best permanent foundation for financial strength. Britain certainly relies upon patriotism to support her conversion scheme, but she offers also the assurance that the rate set by that conversion will be the standard for investment in the future. There is less risk, therefore, of the conversion being a flash in the pan, and the interest rate rising again when the pressure for sacrifice or the threat of compulsion is removed. It is in these movements that the Prime Minister and some of our leading men in business and financial circles see the turn of the tide. The latest cable messages report that gilt-edged stock showed a further all round advance on the London Stock Exchange on Monday. The outstanding feature, the report says, was the buying of 3J per cent, conversion loan, which lifted the price for the first time to over £IOO. What an almost miraculous change in popular estimation of the value of gilt-edged stock. Earlier in the year the market price was £73 ss, while at one time last year these stocks were quoted as low as £67. Obviously, the British Government's faith in the people of tiie Old Land has not been misplaced. The complete rehabilitation of Britain’s finances has already been reflected in New Zealand. The effect is world wide. A notable commencement in the quest for a solution of the world’s economic ills, was made at Lausanne, and the hopes of the national delegations who participated in that epoch-making conference are already being fulfilled by the change in public opinion so manifest in the other countries including the United States. Although Britain has played a mighty part, on the other side of the Atlantic a definite move is being made to lift the burden of war debts from the staggering shoulders of humanity:

Senator W. E, Borah, chairman of the Foreign Relations Committee ol the Senate, proposes an. immediate world conference that should have power to deal with reparations, debts, disarmament, the re-establishment of the gold standard, the stabilisation of silver in the Orient, and other questions. He says sooner or later the war guilt clause in the Treaty of Versailles must disappear. “If the policies initiated at Lausanne are carried forward the time is coming when in the interests of the United States the people will reconsider the question of debts.” It is these and other influential efforts that are bearing such rich fruit that convinces thoughtful observers that there are distinct indications that the worst is over and the world may look forward to a gradual return to normal conditions.