The Feilding Star, Oboua & Kiwitea Counties Gazette. Published Daily. WEDNESDAY. DECEMBER 8, 1897. CHEAP MONEY.

Feilding Star, Volume XIX, Issue 136, 8 December 1897, Page 2

The Feilding Star, Oboua & Kiwitea Counties Gazette. Published Daily. WEDNESDAY. DECEMBER 8, 1897. CHEAP MONEY.

Ministers, and a few other people in tbe colony, are apt to attribute the cheapness of money wbicb now obtains to tbe influence of tbe Advances to Settlers Act- No idea could be more mistaken for tbe reason that tbe same plethora, with its natural results, is to be found in England and the other colonies, and tbe Advances to Settlers Act has just as much to do with it as the proverbial fly on tbe axle of the wheel, or the connec tion between Tartetden steeple and tbe Goodwin sands. There is simply a glut of capital in tbe United Kingdom, and tbe Economists' Banking supplement shows that in the last ten years tbe estimated total of the deposit aad current accounts held iv the United Kingdom has grown from £580,000,000 to £780,000,000 That is to aaj tbe banks owe their customers £200,000,000 more than they did ten years ago. This steady and hitherto unnoticed growth of banking credit, which apparently proceeds persistently, unchecked by trade depression or financial inactivity, is certain to pxoduce momentous results, some of which are already casting their shadows bel on them. In the first place it is well to point oat that tbis increase of capital in tbe hands at banks does most emphatically not jostiff the infer, ence generally drawn froai it, that money is " lying idle. 11 It is only when money is thus drawn together in vast amounts, in the hands of those who devote their lives to its profitable and judicious employment that it becomes available for tbe purposes of finance, and so fulfils its proper function. In countries, such as Great Britain, where the science of banking is highly developed, trade is largely carried on with the help ot credit, and the expansion of cemmercial activity tends rather to in- , crease (has to diminish the capital j which is is Uw hands of the banks, or rather is created by the banks for the j use of traders. From tbe purely financial point of view the result js tjbue n»me. Financial activity and the/apid creaijio* , of aew securities, instead of eating up • banking credit, as, at fiiat sight, it might be expected to do, a^ds to it *sd en- ! courages tbe rapid accei 1 ? 1 *** 011 *f its growth. A new loan comes otit and iB subscribed for, credit being thus transferred from one holder to another, but the securities thus created are used as pledges for fresh advances from tbe banks, and so lead te a further increase of credit, in other words, securities now form a part of the currency. These tbiog6 being 60, and with tbe decrease ia the returns on invested funds— caused by tbe growth of banking credit— has already brought trustees and the more cautious class of inventors to their wits' end. Five per cent has departed and the beggarly 2$ to 3} per cent yielded by securities, are looked npon with suspicion and dislike. But, considers one contemporary, the tendency to a further decline seems probable to tbe

point of certainty. How much further tbe decline can go without bringing counterbalancing tendencies into play is a matter which might be debated at length. After conjecturing what may or may not happen it is pointed oat that as far as the bare necessaries of life are concerned, the fall in price has already been almost commensurate with tbe fall in the interest on money, and there is eTery reason to expect that these tendencies will continue until the increase in population begins to overtake the enormous increase in tbe supply of available land and produce. There is one thing, however, whioh will comfort those who take a pessimistic view of the results of tbe decline in tbe value in tbe yield on securities, and that is the knowledge that whatever happens to the money market, enterprise and industry will always come to tbe front.