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Hokitika Guardian, 3 November 1920, Page 2

Apropos to the statement lately madi as to the stringency of the monej market at Home, an English commer mercial journal of September has tin following:—The closing days of Augus witnessed pronounced stringency ii money, the market on occasion having to borrow from the Bank of England for a week at 7J- per cent. Such a condition is unusual at this time of tin year, hut when the various circum stances affecting the situation are taker in account it is not surprising. Bj 1 effecting considerable repayments oi Ways and Means advances obtained from the Bank of England and Government departments, the Governmeni have brought about some measure of deflation, for while the raising of such loans means a manufacture of credit, thereby causing inflation, so their repay , inept lessens the volume of credit available for Money Market purposes. Probably a more important cause of the stringency, because of the greater extent of the operation, has been the larger purchases of Treasury Bills by the banks. It- may be recalled that the apprehension which existed some time a(ro of a further advance in the Bank Rate was largely due to the sales of Treasury Bills falling short of the maturities, thus compelling the Government to swell the total of tho Ways and Means advances, which, it is generally agreed, is the worst form of Government borrowing. Evidently the banks received a bint that their purchases of Treasury Bills must be increased, and those institutions having acted upon tho hint, the Government were able to reduce the Ways and Means advances with tho proceeds of the Treasury Bill sales, the result being that the apprehension of the dearer official money has now died away. The operation ,however, has meant that the banks have less money to lend to the market, and a reduction of their lend-

k ihg resources is tlid hiOre felt now be- j cause the Government are iio longer con j tinually manufacturing credit in order | to cope witli an extraordinarily big war expenditure. The resources of the mar- ' ket have also been depleted by heavy tax collections. These various circum- I stances explain the stringency in money which is really a healthy feature in that it is tho result of the working of economic laws ,whilst it may be regarded as another proof that we are slowly, if very slowly, returning to more normal