Mr. McKenna's Optimism Mr. McKenna, in the annual survey of
banking and finance which he delivered on Tuesday as Chairman of the Midland Bank, gave good reasons for thinking that the present recovery, or " boom," will continue. He did not think the possibilities of a labour shortage, of excessive Stock' Exchange speculation or an adverse balance of payments serious enough to check it ; the only possibility- he would consider serious would be a fall in the exchange value of the £, Which is unlikely Owing to the immense gold reserves of the Bank of England and the exchange control. A rise in interest rates would certainly be a serious check to recovery, and is the usual result of trade expansion ; Mr. McKenna thinks it improbable, both because the banks have a wide margin of resources' for increased advances and because, on the basis of last year's experience, he does not antici- pate a large increase in demand for such advances. If excessive speculation did develop, Mr. McKenna hoped • it would be checked, not by an increase in interest rates, but by concerted action by the banks to restrict credit advanced • for that purpose. The Chairman of the Midland Bank has undoubtedly grounds for his optimism; he did not, however, examine the possible effect on a bright future of a large Government loan—£150 million has been frequently mentioned as - a possible figure —for rearmament. The intention of the Chancellor to -float such a loan has been both affirmed and denied. Jt is hard to see how he can get through. without• it.
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