The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, SEPTEMBER 27, 1928. THE CREDIT SITUATION.

Hokitika Guardian, 27 September 1928, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. THURSDAY, SEPTEMBER 27, 1928. THE CREDIT SITUATION.

The economic situation is always worth studying because of the condition of countries since the upsetting period of the war, when financial stability became unsettled with the rest of mundane things. The United States, because of its great national wealth is particularly interesting as a study, for despite the millions stored in the vaults in reserve, the unemployed problem is as impressive there as anywhere. Money may not do everything unless it is effectively used, and after all, employment can be provided only by maintaining the wheels of industry in motion. It is one thing to accumulate money and another to so spend it as to do effective good. Naturally, one aid to the effective use of money is the system of credit which pertains. Let us take the situation in the United States firsfcj': Dealing with the changing aspect of the credit situation, an American financial journal goes to remark. Notwithstanding all the publicity which the outward gold movement has received, the public does not seem to be impressed that the movement need involve any change in banking and credit conditions in this country. Apparently many people fail to see why the banks may not go mi expanding credit as freely as when' gold was flowing into tbe country. The rise of interest rates is a common subject of criticism in business circles, and of conjecture as to how long it will last and from what source relief will come. In some quarters the belief seems to be held that money is being made artificially dear, and that the Reserve banks are trying to regulate something that is none of their business. .Some excuse for the failure of the general public to grasp the full significance of the gold movement may be found in the utterances of authorities on the subject of the past. Economists and hankers have been in agreement for several years that further imports of gold were undesirable, the. Reserve authorities have been understood to be favourable to exports rather than imports, and assurances have been given that a large reduction of our reserves might occur without fundamentally disturbing the "credit structure of the country. Why, then, somqljody asks, shoud the loss of 500,000,000 or 600,000,000 dollars of gold seriously change the credit situation. Reply may be made as follows: (1) The opinion that further gold imports wore undesirable was based upon belief that they would tend -to 'produce inflation. wi£h an increase of speculative activities, which probably would involve embarrassment and losses eventually; and (2) that the reserve hanks if conservatively managed, with the obligation to maintain

gold payments in view, would be able to supply the required sums for export without forcing credit contraction. These views have been justified to this time. The credit situation would be stronger to-day if the gold which has been exported in the past year never had come into the country and had been made the basis of credit here. The .reserve banks have made good the expectation that they would supply the gold for export without cu rtailing credits, but their remaining reserves must now carry the increased amount of credit. Their ability to supply more gold for export is unquestioned. All this is as predicted, but no well-in-formed person ever has said that it need make no difference in our banking policies whether gold was coming in or going out at the rate of hundreds of millions per year. This does not exhaust the' subject, to which we will return later, but it indicates what a delicate organisation the credit system is at the base. Too much gold is as likely to he as harmful as too little the commodity. The happy mean under stable conditions, are the safest for the country, and the trader who has to depend on the facilities for credit to. do big business, and the bigger the business the better is the employment situation met,