TRADE AND FINANCE.

Gisborne Times, Volume XXVI, Issue 2378, 19 December 1908, Page 6

TRADE AND FINANCE.

THE SCARCITY OF MONEY.

THE PAST AND THE FUTURE

“There .is no doubt the .Dominion lias gone through a. very trying time financially during tile past twelve months/’ said the manager of a large commercial' land .financial institution to a “Times” 'reporter yesterday; “but there are now indications that the financial cloud that has rested upon the colonies is beginning to lift.” The subject was the .position of the money market and its prospects, and the speaker went on to say th>it the temporary want of -circulating money in the Dominion would' not be absolutely void of good results-, but would teach financial men to exercise more caution in the future bcfore letting out (large sums at a comparativelly llow rate of interest, ‘i.lie money mVwket is very bare at present,” he' added, “and there are no la-ro-e sums available locally for lendin«°at the -present time, even though borrowers are offering from 0 to b per cent. Mv firm is as strong as any bank doing business in New Zealand, 'and does as big a- financial business as 'any, and I could place £60,000 out- on good freehold security in Poverty Bay at 6 per cent if I could ,'tret it," and that is the position throughout the cotonics now tliat the pressure is being fefit at tins end of the world. You have noticed that there has been a heavy drop in the Uvluo of stock. Well, that is not sole.lv on account of tho reduction m avool values, The inability of the stovk agents to finance farmers has .been the main factor .in the Low selin„ rates in the sheep market. Undci normal conditions a sheep will always viekl it certain weight ol fleece, ancl although wool might bo down in price this year, there is -nothing to say that low prices are going to continue. On the other hand, there are signs of a better market, as the cables tell us that the American buyers are a ,rain operating. The sheep do not perish wlion their fleeces are clipped, so that the low- price of sheep cannot be wholly laid at the door or tho wool market. The.-main cause of the' drop in the value in sheep is the want of money. Farmers have to keep to their obligations with tne banks, while, on tho other bind, the stock agents, on account of the scarcity of money, have been forced to shut down on the credit limit to turners and advise them not to overstep their accounts, or to buy too extensively in a falling market, that has been the result here? feomo *arniers, for various reasons, have been forced to sell stock. Other farmers, who ihave plenty of feed, and w no would, under ordinary conditions, increase the size of their flocks, have been unable to buy, and stock has had to ibe sold for what it would bring. Of course such a condition of affairs is most unfortunate for the poor m)m, as the had market rebounds heavily upon him, while it enables the wealthy to reap the .benefit if not immediately, ceitum.j in the near future... The big firms have been unable to advance money on newly-cleared bush Mud, and the result ha.s been that hardly any clearing lias been clone. Stock has not been wanted and there has been little or no inquiry for sheep irom outside, so the Gisborne sheep market has had; to reily on local demands. CESSATION OF LAND TRANSACTIONS. In reply"* to the question as to whether the scarcity of money had forced agricultural or postoral land on to the market tho same gentleman replied that such was not the case, but that land transactions had practically ceased during tho past twelve months. “My firm,”-he went on to say, “usually sells oy%r 100,000 acres a year in this district, but I don t think I have sold an acre for many months. You see our hands are tied and we, are unable to effect land sales unless we are prepared to advance a portion of the money. There are plenty of land buyers about, but most of them are unable to find the difference between the deposit -and the purchase money, the consequence being that few- sales have taken nlace. Is the position likely to force pastoralists to hasten to realise on their wool? - . “No; I don’t- think the financial squeeze will be as hard as that,” was the reply. “Certainly a few advances have been made on the clips, but the wool-brokers are no more willing to risk the market than the growers, and as most of the wool from this district is sold in London, the growers -will be able to get full market prices. One or two men have sold locally, but these are exceptions, and if the. improved London market is maintained tho prospects for tho next year will be brighter.” In discussing the financial position of tho district and the prospects for the next year with the reporter, tlio manager of another large mercantile and financial institution was even more optimistic. “The recent substantial increase in the value of wool will not bo without benefit to this district,” said the commercial gentleman, “and the favorable reports from London had had some effect in relieving the financial tension that has been felt in this district for some time past" but the improved prices by no means place the money market on the same basis as it- was some few years ago. The depression—if it can be called that—has forced farmers to realise their positions and to adjust their expenditure in proportion to their incomes, and it- is to be . hoped the experience of the past twelve imontbs will be beneficial to the man on the Lind in tho future. There are, I am glad to say, signs that better times ar© coming on the East Coast. -In the back country large areas have been sown in rape, especially where there.is poor quality land, and the result will ibe (improved land. Rape makes excellent fattening for lambs, and wall largely come into use as its vallue becomes- know-n, . -and there will (follow a larger turnover in fat stock land a consequent relief of the store sheep market. Then, again, the cereal crops will have benefited by the recent rains, which have been general and- the prospects •for 1909 are a great deal brighter than they Avere for the present year.” THE BANKERS’ VIEW. The opinion expressed by two bft-nk managers who were (interviewed on the financial outlook for the future ■was not so hopeful, and both gentlemen lagreed-. that there were no signs of immediate relief. Asked if the improved tone in the. wool market would make money more plentiful in

Gisborne, -one gentleman said lie did not expect to seethe rate of interest reduced before the shearing season of 1910, as the scarcity of money was not only local, .but general, and there Ava-s a demand for advances all over the Dominion. “Farmers,” he eontinned, “are endeavoring to meet the wishes of the banks in every possible way, and while that is done there is no need to cause any embarrassment to the banks’ customers. As against this, it must be remembered’ that the normal earning power lias been to some extent decreased, because many farmers who have new country are unable to obtain advances to develop their land. The production, therefore, has not increased | this year as in former years -and this, 1 with a total loss to Australia and | New Zealand of some six millions ot money, must have a retrograde effect on the agricultural and pastoral industries, and 1 it will take years to recover the loss. Stil'l, the banks do not view tlio position with any uneasiness, and there is no effort to push borrowers (into an extreme position. Tho depression Avill -not be without some good effect, as it will make security holders more careful an Avatcliing for bad times and cause financiers to keep more money in the Dominion.” , The other bank manager said he could not look upon the near future | with any-optimism Money was not , easv to obtain and higher rates of interest Avere asked for. “At the same time, strange as at may seen), business is good locality, and Monday last was the busiest day on record tor his branch. The merchants *md retail traders appear to bo busy, and a large-number of country cheques are passing through the banks, winch shows that though money is scarce the country people stud find a good ■amount to spend. I cannot do better than concludo by quoting irom the speech of the chairman of tie Bank of New Zealand, made at the half-yearly meeting, ho.d in V elhn» ton early this month, m winch lie said, inter alia, ‘With the cessation of speculation an land, the i eduction of imports (which cannot be brought about suddenly), tlio curtailing ol credit, and more economy in Private expenditure, I lave little doubt that our financial equilibrium avill ere tong bo restored.’ ”

EFFECT 'ON REAL ESTATE BUSINESS.

A. business man who is largely interested in real estate, while talking to the reporter on the question, throw a. new light on the position, ancl said that Australia, was to some extent responsible for the financial stringency m New Zealand. “A 'few years ago,” he explained, “when things. Avere not prosperous on the other side, ana there were good times an New Zealand, the Australian branches of the banks sought investments here. When prosperity came again' to Australia, as it has done during the past tAvo years, the money was -withdrawn, ancl that consequently pressed on the currency here. Noav, Arhat is the result? The New Zeiiland branches of the banks say they have no money to lend, aud if a man wants to buy .property and lias 50 per cent, of the purchase money it is difficult to raise the balance. During the past six months the pressure has been felt to no inconsiderable extent in estate ■business, and comparatively few sales hive been transacted. The cause is not from a dearth of people willing to buy or from (falling values, but clients have frequently been known to close .a bargain and then come along to the estate agent a few days later ‘.ancl say they have been -unable to finance the -balance of the purchase money, even when good security is offering. While trade is sound in ordinary commerical circles, there ■is no doubt there is a slump in big finance, -and security holders find it difficult to .borroAV or even to renew ‘mortgages. People avlio have- purchased property on terms are feeling the position, las in many cases they cannot meet the calls when the time arrives 'for -payment.” “Are the mortgagees using -undue pressure in those cases ” the -reporter asked. “Not generally,” Avas the reply, “and in those cases Avhere the borrowers have to be ke-pt up to the -mark the lenders .perhaps nave 'arrangements with the banks, and the banks are exacting, while generally speaking private lenders are rather optimistic. It is extremely difficult to get overdrafts extended, even Avhen security is offering, and new overdrafts are being refused.” “Are the banks using-any pressure to keep business men within thelimits?” Avas the next question put. “I don’t knoAV of any accentuated cases,” the gentleman replied, “but I know that if there is any tendency to overstep the mark they rare promptly pulled up. I knoAV of one bank that is very cautious of handling hills, hut Avith - most of them a bill bearing a good signature can be discounted. Tho prospects for the future are limprovang, slowly, perhaps, but thero are signs of improvement. One thing the people should remember is that boom land values are -not good for a district, and there is no do-übt land is over-valued here, both in the town and country. Land has been dealt in too frequently for speculation only, and the time will come when property holders Avill take a more reasonable vieAV of the value of their (land. Then they must not forget that the exports last year Avere nearly one and a-hallf million pounds less than the imports, and with two ■and a-half millions to pry* as interest on the (national debt it means that a lot of money has gone out of. the Dominion. It must be admitted, however, that tho banks are most to blame for the present position of the money market, and there is need for an inquiry into tho banks’ methods of making advances, and some law to better control, that part of the banks’ business. When -money is. plentiful the banks rush people with overdrafts, which lare payable on demand, and when a tension in the market arrives the borroAvers .are called -upon to reduce their overdrafts, Avith. the result that they are either out d,n a tight corner or have to go to the- -bank manager, hut in hand, to ask for •favors. When the screw is put on they are forced to part with their securities, -and that position would never occur if the banks Avould only make advances in times of plenty on the same terms a-s in times of scarcity, and there is need for a law that will have some check on advances made by banks.” When the manager of a -firm doing business as financial agents wUs asked to express an opinion on tho position, he said that at the present, and for

some time past, there was a demand for money that could -not- (be supplied either by the banks or by privHte persons, even -when gilt-edged security -was offering. “Even mortgages on freehold -are hard to renew, and when a -renewal is given the rate of interest is increased from two to three per- cent. The' banks are declining aM applications for udA r ances, and there -are a large number of (bills in circulation. Those that are good are accepted, but firms are very cautious of discounting paper money. There fare a few signs that money w ill be a (little more plentiful in the future, but the plentitude is coming very stoutly.” WHOLESALE AND 'RETAIL TRADE.

When the reporter interviewed the ananagers of wholesale houses, he <wus told that the year’s trade had been satisfactory, and that the turnover had been quite up to former years. “Gisborne is not ia bad trading town at all/’ said one manager, “and there is every prospect that the wholesale trade Aviill increase here. Just observe how many warehouses are here already; nearly every bag firm in the Dominion is represented. What the Avholesale branches here Pave to complain of is not the dearth o-f trade, but tho competition an trade, for, AV'liile the volume of business is increasing, there are far too ■in anv wholesale houses for such a small district. I have aiot seen any financial dopressnon m # trado. My customers all meet their liabilities promptly; there are no requests loi extended credit, and all the warehouses are looking forward to a pms.perous time in Gisborne m 1 Ur*'*. The retailers are also. °P fc in The drapers are grumbling a Lttle over the -unsettled Aveathei, and stare +hnfc t'liov € out! cl do with a few months slimmer stocks are on hand, and as soft goods do not in crease in vallue with age, they aie anxious for a quick turiiovoi. Th "raceis oro .busy, and are. quite satisfiod with tlio year s business. Out .retail grocer said ho has never ha a busier December since fie has been in business, and if there had been any scarcity of money he lxad not fol't it.