Evening Post. TUESDAY, JULY 10, 1923. "GANG WARILY"

Evening Post, Volume CVI, Issue 8, 10 July 1923, Page 6

Evening Post. TUESDAY, JULY 10, 1923. "GANG WARILY"

Special interest attaches to the June quarterly returns of the banks transacting business.in. the Dominion. As some may have good reason to remember, it was at the end of the second quarter of 1921 that the position was disclosed of the public being indebted to the banks by £9,000,000 (£8,874,390, to be exact) more than the banks were owing to the public in the form of deposits, placed with them. This was the heaviest debit balance against the banking public in the 'history of New Zealand. The quarter ended 30th June, 1920, however, showed that the money placed by the public with the banks on,. current account and fixed deposit totalled £04,598,092,' ■ whereas' the loans made by the banks to the public amounted to £34,789,581, so that there was then a balance to the public credit of £19,808,511, say £20,000,000. Twelve months later this credit had vanished, and in its place was a debt of nearly £9,000,----000, a loss of, roundly, £29,000,000 in a single year! .The banks had to make up the deficiency—£2B,6B2,--90], to be precise, for the deposits had shrunken by £9,088,997, and the advances grown by £19,595,904. The banks must have drawn pretty heavily on their own resources to meet the position that had been created by circumstances not entirely under the control of the Dominion. Liquidation was drastic,• and it had already been sharp from March,_ 1921 ; . the overdraft rate was raised to 7 per cent, minimum, which means on the most select of securities, with liberal marginwhen advances were made at all; and the moratorium on deposits taken by others than banks was imposed to prevent the possible withdrawal on demand, or at short call, of an amount estimated to be £10,000,000. Not a moment too soon, it is generally accepted, .was that moratorium imposed; it is believed also to have averted a very serious financial crisis.

To-day the public is in credit at the banks by £3,971,679^5ay, £4,----000,000. This is most gratifying and encouraging. The process of read 7 justment has been rapid, and. it has also been severe. Nevertheless it is a fact that an excess of advances ox £8,874,390 as at the end of June, 1921, has been converted ■ into an excess of deposits by nearly £4,----000,000. There has been a shrinkage each quarter of the years until June, 1922, when the advances were down by £4,767,048; at the end of December, 1922, to £2,326,----59 3; and at the end of March, 1923, the corner is turned, with deposits in excess of advances by £944,245. The recovery has been remarkably speedy, all things considered. It is eloquent proof, too, of the' great recuperative capacity of the country.. This may very largely be attributed to the combination of economy and increased production. Returns from produce, on the average, have been satisfactory, although markets have experienced some" sharp fluctuations, especially in butter and cheese; but prices have been well below the' boom levels of the Imperial purchase years, and they were merry times while they lasted. They were also responsible for the currency of the belief that high prices for produce would remain high, if not go higher. On that erroneous assumption values of dairying and other farm lands were based, and financial obligations entered with a light heart with respect to those lands, also with respect to many other things, not directly associated with farming. Not only were the returns from the land itself to be looked for as goodj but there was always the alluring prospect of a likely sale, with a substantial profit made in a few weeks, even a- few days. This was better than farming. There were (for a time) always , some purchasers coming along for likely places, ready to take them over, encumbrances and all—also with a view to quick and profitable realisation.

Then Celine the ides of March, 1921. The breezy was blowing pietfcy briskly then, but it reached hui'riuuiiij i'ui'L-u tho following Jurus. It has, happily, been subsiding evei 1

since, and, so far as the banking returns indicate, "fair weather has set in. These returns, of course, relate solely to our domestic condition ; but there are many rather disquieting, signs beyond the horizon of New Zealand to be considered. These signs give concern to many whose special interest it is to study them, who read financial and commercial data as a meteorologist consults his instruments. The fact that for the first time since 1020 deposits held by the banks are reasonably in excess of advances, or overdrafts, should not be taken to justify any relaxation on the part of the Government or the community as a whole of a verycareful husbanding of all resources, financial and other. There has been some recent trouble in Wall Street; a recent writing-down of capital by a great South African bank to meet heavy losses; and there is still some uneasiness in the United States at the falliug-off in primary markets and excessive importing. Bankers and other financial authorities in' America are issuing warnings to the effect that the present great prosperity is due for a check. What is happening, or may happen, in America does not, at first sight, seem to concern New Zealand ; but. it was trouble in New York in 190 V that resulted in trouble here, even to a sharp fall in values of real estate in Wellington. We feel the backwash of disturbances, originating even in New York, if they are sufficiently severe. No harm can possibly come of the exercise now and at all times of ■prudence i-:. Government administration and finance and commerce generally. The motto of an old Scottish family, " Gang wai%," appears to bo the best to follow in the present disturbed condition of finance and trade the world over, notwithstanding that on the banking figures New Zealand is now well round the corner.