WELLINGTON NEWS

Hokitika Guardian, 22 July 1927, Page 4

WELLINGTON NEWS

AGP [CULTDUAL PPOSPERITV. (Special to “ Guardian ”.) WELLINGTON, July 20. The restoration of the gold standard in the British Empire was announced by the Chancellor of ihc Exechequer, .Mr Winston Churchill on April 8, 1025, and it is something more than a coincidence that.prices of primary products began to decline after that. It was

■some little time before we felt it. in New Zealand. As a matter of fact there appears to he a close connection between the gold currency and commodity prices. While prior to the restoration of the standard prices were based on paper currency which was unstable, prices are now based on stable gold currency, and the unfavourable distribution of supplies of the yollow metal, together with the increasing demand for it. must continue! to press down prices of commodities and particularly primary products. Tt was a fall in the average price ol ! agricultural produce over a long period which caused the bad times of 18751000. and the shorter and more sudden disaster of 1021-2; 1. While coinmodi- 1 ties other than agriculture equally concerned in these general fall’s of prices, l yet it is such that cause the periodic deep depression from winch farming suiters rather than the fluctuation in individual crops which might be cured hy ordinary marketing. The most important factor in these general changes is neither agricultural nor economic, hut monetary. Tito general price level depends chielly on the relation between the amount of currency and credit and the velocity at which they circulate on the one hand, and the volume of business to be linnnced on tLie other. After the war of 1870-71 many countries adopted a gold standard. This increased the demand for gold for reserves and currency while the supply of the yellow metal remained about constant. Hence gold became relatively dearer and goods and services relatively cheaper, that is prices fell. This was the cause of a long agricultural depression. The depression continued ' until tlie South African mines began about 1900 to increase the gold supply available. Owing chiefly to the length of time involved ill agricultural operations the fanners suffer more than most men while prices are falling, and at such times agricultural depression is inevitable. Present times closely re-, soluble those of 1874. Many nations are returning to a gold standard, and, India absorbs an increasing amount of gold. The demand for gold is rising., while on the other hand output is little more than satisfactory, in fact, in the absence of new discoveries, the supply of the metal is likely to decrease its the South African mines become exhausted. A reduction in prices due to improved methods of production is a gain to the world, but a fail in price duo to contraction in currency and credit is a disaster. It leads to industrial depression and unemployment. The distribution of the available supply of gold ;it the present time is rather unequal. for abouf three-fourths of -it is domiciled in the United States making the position very difficult for the rest of tlie world. Flow to economise in the uses of gold is the problem confronting, Europe, and apparently there is it proposal to adopt what is known as tlie gold exchange standard, a matter that wars recently discussed in Washington by international bankers. \\ e .-.half probably bear more about this later on, in tlie meanwhile there is little hope of prices moving upwards, cuinequently the sooner we adjust our, cost ; of production to suit, tlie changed conditions the sooner will he enjoy easier conditions.

BANKING CAPITAL. For two or three years past the demand for credit, and especially hank credit has been exceptionally strong and the hanks have done their utmost under very difficult circumstances to nice t the situation. Last year quite a mtinhcr of now capital issues wore made in the hanks in Australia and Xew Zealand, and since the beginning of the year nine banks have issued new shares. Eight institutions in Australia have raised or are raising €4.881.hflO. These are the Hank of Adelaide ‘-•*->O,OOO. Australian Bank of Comlucre e {jdO!!,00(1, Commercial Bank of Australia £500.000. Commercial Bank o( Sydney £500,000, English, Scottish and Australian Bank £750.000, National Bank of Australia £1,400.000, Bank of New South Wales £(i*’s,()oo, and Queensland National Bank £2.30,000. Then there was the Bank of New Zealand T) shares, and there is an issue of 100.000 shares by the Union Bank pending.