HIGH RATES IN U.S.A.

Daily Telegraph (Napier), Volume 58, Issue 164, 13 August 1929, Page 10

HIGH RATES IN U.S.A.

"UNCLE SAM" FEELS THE PINOH The liigh rates ruling for money in the United States have been reflected in a recent issue made by the Governraent Treasury Department. Tlie araount required was 400,000,000 dollars and the department was f'orcod to pay 5| per cent interest, the highest rate paid by the Govemment since 1921, and one in excess of the Federal Heserve re-discount ratc of 5 per cent. Fifteen months ago the Treasury only paid 3| per cent for a simijar loan. Last December, when it was floated at 4;\ per cent nine months' loan, the idea p-revailed thit the stringencv would relax after the New Year. Jnstead the Wa II Street money market tightened further. The Treasury had to bid 43 111 March and in June 5^. A special aspect of the situntion is that for nine years the rnte paid hy the Treasury for its short loans has been less than the reserve hnnk rccliscount rate, the rcason being that ihe Govemment loan not only represents the highest tvpe of security. but is exempt from all Federal or State taxation, except inheritanee and surtaxes. The present reserve bank rate is 5 per cent. ; it has not heen changed since July, 1928, although. in the intervening period, open market rates for mercliants' paper have risen from 5 per cent. to 6, and time loans on Stock Exchange collateral from 6 to 9.)._ Even the Treasury i- now compelled, 111 fixing the 5|- per cent. rate for its new horrowing, to lecognise actual facts as tlie bank rate has not done, and to bid above the rate at which the Reserve hanks will re -disqount Government obligations. This has not occurred since 1919. The inevitahlo conclusion from the foregoing is that an appreciable easing in the Wai! Street money "market can scarcely he loobed for in the near future.