City and
Shrinking money Poor sterling, poor all of us! The mar- kets seem to have lost their fear of the central banks' intervention. That psycholo- e?cal war will need to be fought again, this nine with conviction, and ammunition. For the moment, though, sterling's defenders are concentrating their fire on the target for the money supply, trying now to hit it in the bull's-eye rather than where the double would be on a dartboard. What has not been observed is the ingenious secret Weapon which they are bringing into use. It Was commissioned by the Chancellor at the time of the Budget., He then gave the hanks a year's notice that they must follow the building societies in deducting tax from the interest which they pay to their deposi- t,?rs- (The Government's own deposit- taking business, National Savings, remains exempt,) Already the banks have begun to obey, but they cannot undertake to bring their depositors with them. If you are in the happy position of lending your bank Money (and somebody has to, or there Wcnildn't be any), you now have a choice. Stay with your High Street branch and pay "al as you go, at the slightly favourable composite' rate. Or move your money to Your bank's Channel Islands branch, re- ceive interest gross, and leave paying tax until you finally send in your yearly return. (You will remember to declare the in- terest, won't you?) The big banks, now discreetly promoting their presences in the Channel Islands, are up with the game. The islands used to play host to `roll-up' Money-market funds, where interest was in effect treated as capital gain. When that was stopped, the flow back to London was reckoned to swell the money supply by one Per cent. The islands must now expect to get it all back, and more — how much more? Two per cent off the money supply? Three per cent? Just what is needed. Let us look that the foreign exchanges do not 100k too closely at how it is done.
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