THE PREVAILING DEPRESSION.

Manawatu Herald, Volume III, Issue 12, 12 October 1880, Page 2

THE PREVAILING DEPRESSION.

» [Notes by a Traveller.] In my last I said I might tell you more some other time if you were at oil interested, and as you took the trouble to insert the first, may be you'll do likewise with this. Well, Sir, Bulls or TJulltown, like Sanson, is called after its patron saint (if saints they be.) It is h<irdly necessary to eater upon a description of tliia locality, or of its residents. Tt will bo moru interesting to them to answer their queries than to describe themselves or their locality ; but it might be interesting to the outside public to know something of them. Well, Sir, the poople here are rather of an enquiring turn ot mind. For instance, they wish to know the cau«e of the prevailing depression in commercial affairs — when it began, the cause, and when it will end, and the cause. Now these are rather " tall " questions for an amateur scribe to answer, but still they are questions that mean a great deal, and it is very doubtful whether I can answer tnem to their satisfaction, or my own either. I will, however, make the attempt, and they must take the will for the duel. That there is a depression of a very widespread character no one will deny, and that there is a first cause is also equally plain. That each individual ia this great land h interested in, and affected by the commercial aspect of affairs ia another fact that will not be questioned. But now comes the question. Why is trade thrown off the balance P and what are the causes that bring about prosperity and depression alter uafcoly ? Many reasons have beau assigned at different times by different people, moat of which are only partly tho truth, and I do not hope to accomplish more than they. I will first enquire into the cause of prosperity, and then iho cause of depression will be the more apparent. It will be admitted that our prosperity corarnenoed shortly after the floa <i<i!>r of Mr Vogel'a great Public Works and Immfgra tion scheme, when the borrowed millions were being spent. The Government loans for the most part were deposited with the Hank of New Zealand at Home and in the colony. For the present I must confine myself to the effect produced on the colony by the above policy. ' The Public Work* scheme created a large demand for labour. The Immigration scheme supplied that demand for the time then being, rhis Urge influx of population had to be supplied Merchants imported very large stocks which found ready sale, wages ruled high, and all were supplied with work ; land in town and country went up to fabulous prices; speculation was the order of the day, and things got into a most in ated state. From the smallest tinpot grocer up to the largest merchant or mercantile company, all were speculators. Any fellow that would stick a rag up in his window and a tin or two of coffee, might call him self a draper and grocer, and would be waited on by commercial travellers and supplied to any amount on bills ranging from three to five and six months' time. The goods sold by Buch retail tradesmen, while his bills were current, gave him a large amount of money, which, from ignorance of business rule, or want of thought, inca pacity, or other causes, he knew not how to employ ; and instead of caret ully shepherding his resources, he would be tempted to speculate in land or other commodities ; or worse still, to erect houses on land already bought in the name of, or made over to, his wife, son, or daughter, as tho case might be. When his trade bills became due, he would get a renewal from his merchant, or an O.I). from his banker, and bo carry on until the evil, day onme, and then a smash, or an assignment, would be the result This rookies* trading was encouraged by merchants allowing their representatives to take orders from such amateur, incompetent tradesmen, without capital or experience, and the consequence too frequently has bwen that the legitimate tradesman has been ruined through having to compete with persons who had no fixed rules or principles to guide them. About this time nearly all olasses wore to blame. The wholesale merchant imported far too heavily, the bankers gave credit too freely, and the lapdshark cut up his land and made beautiful little paper townships, and sold them for paper money, in the shape of bills, and these in turn were discounted by Mr Banker; and not only so, but the buyers of these paper townships cut up their holdings and resold them, also for paper at any dites, which were also in due courso discounted by the said banker, so (hat for the same piece of laad there would be two or three sets of bills current. These, and many other such transactions, wore of common occurrence, and were encouraged, too, by men who should have known batter. Even prudent, thoughtful m» i n have been drawn into the vortex, through bring intermixed with men who were reputed to be wealthy, but who, ia point of fact, were only occupying a fictitious position, being propped, up by^ an array of useless paper and by kite flying, till of course the end o»me, nod with it a

bitter ending for those who were led to repose confidence in them. Well, Sir, bad as this state of affiirg was, it was not all chargeablo directly to the unhappy victims of misfortune. As I have before said the Government kept their account with this Bank of New Zealand, and as a consequence an outlet had to be found for the borrowed millions end other capital. What I mean by " other capital >-r jT the capi f al belonging to the New ZealaorfXoan and Mercantile Agency Company, which is intimately associated with the said Bank. Now, I shall try to show how the action of these institutions assisted to throw trade off the balance. In London the Loan Agency has a system of advertising, whereby they offer a higher rate ot interest for money* than the ruling rates, the Agency or depositors having the right to terminate such loans or deposits by either party giving to the other six months' notice iv writing. About the time the depression began the failure of the Glasgow Bank took place, and thousands were immediately called upon to pay into that wreck, both shareholders and others, many of whom had large deposits with tho New Zealand Loan and Mercantile Agency, and who, of course, bad to give the required notice, withdraw their deposits, end pay into the Glasgow Bank, Other?, again, taking fright and losing confidence, also withdrew, in oonseqnenoe of which very large sums had to be remitted from the Bank of New Zealand here, to meet the demand at home. It is needless to say these large sums had to be extracted from their customers here, who previously had the money thrust on thorn. About this time, too, the Australian banks trading in New Zealand had to remit large suras to Australia, and even if money were not actually remitted, it had to be kept in readiness to meet the demand. I have b«en told that very large amounts -were sent from New Zealand, but to the credit of the Australian Governments, be it spoken, they borrowed instead of withdrawing their capital from the Banks, who had already employed it. Then, too, the fall ia wool followed ou the heels of all this, and to make matters worse a weak milk-and-water native policy was adopted by both the Grey and Hall Governments, whereby the credit of the Colony was injured at home through fe.tr of native disturbance, and aa s natural consequence the outcome of all thii is the fall in value of all classes of property, brought about on the one hand by a bad policy on the part of large banking and agency companie3,and on the other by a bad policy as regards the Government of the Country. During the period to which I refer, it was estimated that between six and seven millions sterling left our shores. Iv the first placo it was wrong for the public money of the Colony to be placed in auy one Bank, and in the second place it is wrong that any Bank should be so allied to any company or institution outside itself, that any sudden draw can be made, and the legitimate trade of the Bank and the interests of ita customers embarrassed. The above are at any rate a few of the causes that have operated to bring about our undue prosperity and the heavy depression from which we have suffered. I shall have more to say anon.