WELLINGTON NEWS

Hokitika Guardian, 17 October 1930, Page 7

WELLINGTON NEWS

MONEY BAROMETER.

(Special Correspondent). WELLINGTON, October 15. The Banking returns for the third quarter of the year have been anxiously awaited by a good many people, and now they are available they are certain to cause disappointment if not dismay. The returns fully reflect the adverse economic conditions prevailing, and the figures may be described as being normal in an abnormal period. They could not be otherwise. The salient features of the returns and those that require careful study are the demand and time deposits, which represent the amounts borrowed by the hanks from the public, and the advances and discounts which, in turn represent the amounts borrowed from the public by the banks. Some people hold the foolish notion that the banks can supply unlimited credit from Pandora’s box; as a matter of fact it must be obvious that the banks can lend no more than they can borrow—in fact not nearly so much, because about two-fifths of their deposits are demand deposits, and they must be prepared to meet such demands, consequently must hold some portion of the deposits liquid. The demand deposits in the last quarter amounted to £20,803.171, as compared with £23,968,295 in the September quarter of last year, a shrinkage of £3,165,124, and these are the deposits against which cheqneg are drawn, A survey of the aggregate of the demand deposits for the December quarter of each of the six years, the figures of the past quarter are the lowest, being just over a million less than in September, which was the next lowest. There is no stability about the demand deposits for they must necessarily vary from quarter to quarter and year to year. The fixed deposi ts for the last quarter amounted to £31,747,268 as compared with £30,600,331 in the corresponding quarter of .1929. It is noticeable that the fixed deposits have been steadily increasing year after year and'have gone from £21,074,892 in 1926 to the present total. It is difficult to account for this, but it seems to indicate that the owners of the fixed deposits are unable to find investment for their funds, or are unwilling, to make investments and prefer a small rate on interest and safety to running any risks. The demand and the time deposits together amount to £52,550,439 as compared with £54,568,626 a year ago, a decrease of £2,108,187. This is the total which technically speaking has been borrowed by the banks from the public.

The advances for the past. quarter amounted to £51,399,840 as compared with £48,544,604 in the September quarter of last year, an increase of £2,856,826. Allowing overdrafts is one way that banks have of lending, and another way is by discounting promissory notes or acceptances, that is drawn bills. The discounts for the past quarter totalled £1,107,061 an increase of £112,673 on the corresponding quarter 1929. Thus the hanks have increased their loans to the public during the year by £2,968,903 notwithstanding that their borrowings from the public over the same period decreased by £2,018,187, and yet there are some people who insist that the banks do not help the country, and do not lend as freely or as cheaply as these amateur bankers consider they should. The aggregate of the demand and time deposits, as already stated, amounted to £52,506,901, Thus the banks had lent to the public within £44,000 of the amount they have borrowed from the public, and from a hanking point of view this is, to say the least of it, very unsatisfactory. Last year the deposits exceeded the advances by £5,030,634, and the banks then had plenty of money to lend, but times were good then and there was not the same call for bank credit there is now. With steadily falling prices for commodities, dull trade, increasing taxation and unemployment the demands on the hanks, actual and prospective, are severe, and the banks may he obliged to raise the overdraft rate or to ration borrowers. Then there is the exchange on London which must rise herein sympathy with Australia. There is one other aspect of the banking returns to which reference may be made. The demand deposits against which cheques may be drawn, and the note circulation represent in some degree the spending power of the people. For the quarter just closed the aggregate of these two items was £26,812,346, in the September quarter of last year it was £29,659,129, and in 1928 it was £30,240,648. Compared with last year the spending power has decreased by £2 816,785; and according to the economic absurdities of the Labour Party when the people have less money to spend is when they ought to pay the workers increased wages.