WELLINGTON NEWS

Hokitika Guardian, 4 July 1931, Page 2

WELLINGTON NEWS

NO VISIBLE CHANGE. (Special Correspondent). f WELLINGTON, July 2. ■ In spite of the many forecasts made my many optimists the first half-year [lias closed without any change being .visible in the severity of the worldjvyide depression. A comparison in the prices of money securities and commodities ruling at- the end of March and* .the end of June discloses only oneMifferesting and important feature, and that is that Bank rates in the prinicipal financial centres are lower, for instance tho Bank rate in New York which in March last was 2 per cent is now per cent, the Bank ol England rate, which was 3 per cent, is now 2i per cent and is expected to fall immediately to 2 per cent. The Bank of France rate has remained steady at 2 per cent. In spite of this the lending rates are not any lower, on the contrary they are a shade higher, thus in London short loans have gone up from 2 to 2£ per cent, and three months’ bills from 2 9-16 ,per cent to 2 1-32 per cent. In New York call money, which means money loaned to Stock Exchange Brokers and repayable at call, has advanced from 1 per cent to JJ- per cent. Low bank rates*have had no influence as yetj but they certainly, will influence all markets presently. The foreign exchange rates have improved and are mostly in v favour of London, the result being that gold .is flowing towards London. During the past five or six weeks the holding of gold by the Bank of England fias risen from about £147 millions to about £162 millions. One point that should be noted is tha't gold is lower, which is a favourable factor. The standing prices of fine gold, , 995-10G0th fine is about 85s. Towards the end of March the open market price while a few days ago the price was quoted at 84/92, a drop of Id per oz., which does not, seem much, but when a half million ounces change hands it means a good deal. Not so very long ago the price was Id above the standard quotation. The fall in the price of the metal is ap indication that there is not now that keen and persistent demand for 'gold which caused so much disturbance in world economics.

With the fall in the price level less money is required for financing trade and commerce consequently there is less need for gold. Cheap money in the chief monetary centres has so far not exercised any beneficial effect, but it is bound to do so sooner or Inter. We fancy that many people who have vague ideas of banking and the credit structure will iuI sist upon cheap money ruling in New s Zealand, indeed a demand in that res- r pete has already been made by a Cham- j her of Commerce. The fundamental er- ■ ror of most currency schools is that it 1 is the business of some one to furnish cheap money or credit for the benefit 1; of the public. In New Zealand, some are £ of the opinion that the Government should furnish cheap money and others s criticise the hanks for not doing so. It i s nobody’s function to provide cheap money, for money must become cheap, as it becomes dear, through the oper- . ation in economic laws. It is certainly not the business of the banks to provide' cheap money at the request of the Government or the public. They are in c a fiduciary position and are the guard- £ ians of their depositors’ wealth. They cannot be blamed for refusing to risk 1 their depositors’ money in hazardous i enterprise, nor is it their business to £ invest in undertakings in which their f j capital is likely to be locked up for indefinite periods. The banker deals in ( ! money as another businessman deals in .] ! some other commodity; he lends it for , short periods and makes a charge for ( its use, he turns it over as fast as he s run, but he neither presents himself in the guise of a universal provider of capital nor wishes to share in speculative operations. I There is no* prospect of cheap money ' ; in the Dominion just yet, but that will 1 come in due course, and its advent will 1 not mean improvement in trade, on the f contrary, cheap money will be the result of dull trade and blunted enterprise. That is what it indicates in Eur- | ope at the present time. Still cheap : money must eventually work its own cure. As soon as there is the least sign |of returning confidence enterprising ( people will take advantage of the cheap ( credit offering and embark on new yen- ( tures. To a certain extent cheap money means lack of confidence. When confidence rules there is always a good de- ' maud for money for all kinds of enterprises.