MONEY WITHOUT CONFIDENCE

Evening Post, Volume CXVIII, Issue 90, 13 October 1934, Page 8

MONEY WITHOUT CONFIDENCE

High taxation, high exchange, and business uncertainty are contributing factors in the banking position revealed in the September returns. Deposits total £63,55.1,861 and advances and discounts £40,177,137. The banks hold over £23,000,000 of the public's money for which they can at present find no profitable use. It may be said that this is; a worldwide phenomenon and that It is incorrect to ascribe it, even in part, to local causes. Basically the depression is world-wide, but local measures may aggravate the trouble or lessen it. In New Zealand, we believe, some of the corrections of trouble have become causes of more trouble. High exchange has halted business. High taxation has had the same effect—especially the sales tax which the Government finds profitable but at the expense of trade. At- the back of it all is an uneasy feeling, springing from interference with contracts and expressing itself in a reluctance to invest or undertake new enterprises. Some people, the spokesmen of the farmers and the majority of the Monetary Committee, think that there would be an improvement if interest rates were reduced. No doubt it was hoped that redemption of Treasury bills by overloading the banks with credits would have this effect. But the banks cannot forget their duty to depositors. They must look for security. Where this security is available a difference of half or one per cent, in the overdraft rate (representing a proportionately smaller charge on an adequately capitalised enterprise) is of minor importance. Of much greater importance is the confidence factor. Those who have urged and are still urging measures which cannot but lessen confidence should consider the results