MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LVII, Issue 179, 30 June 1937, Page 5

MONEY AND BUSINESS AFFAIRS.

MOVEMENTS OF CAPITAL. (By The Stock Exchanges of London and New York and the Paris Bourse have | only just come through the gold panic |to he faced with new troubles. 'There ! is obviously fear on the Continent, and I particularly in Trance, of currency ' manipulation. It is expected that the jj’rencn llano uni be devalued presently; | consequently there is a flight from the franc. Trench currency is being exchanged tor sterling and dollars, hut mainly for sterling, as is shown by the aunormal increase in the Bank ol England note circulation, which at £4bo,UUO,OUU is about as high as it was during the Coronation. Those who have converted francs into sterling currency would naturally hoard the notes, ! and to provide cover the Bank of EngI land has had to increase its gold j reserve, which has risen from £313,200,000 to £326,400,000—an increase of £13,200,000, while the note circulation has advanced from £479,- , 800,000' to £483,700,000, an increase of < £3.900,000. As a further precautionary ; measure the Chancellor of the Exchequer has taken authority to strengthen j the Exchange Equalisation Fund by £200,000,000, which would bring the fund up to £550,000,000. The fund was originally established at £150,000.000 ! and there have been two additions ! since, each of £200,000,000. It is apparent that the authorities 1 anticipate tnat a considerable quantity of foreign de-lioarded gold will come on the million market, and this must be taken up at the present price of £7 per ounce. It is quite possible that the United States has influenced this movement. That country lias been made the dumping ground for gold for months past, and has paid the price. It is probable that America finds that she cannot longer continue borrowing . to buy the gold pouring into the country, and there is ever present the other danger of credit inflation. It is possible that the British Government lias been asked to step in and relieve America for the present. However, the British gesture clearly indicates that . the price of gold will not be allowed |to fall below £7 per ounce; at all 1 events that is how the holders of gold j shares view the position, for' there has i been a sharp rise in gold shares. This should serve as a hull point to the Loudon and New Y'ork Exchanges, and South Africa should ho jubilant. The trouble that lias now arisen is no doubt centred in Paris. There has been a change of Government in France and it was stated by the new Premier that, attention would be concentrated on finance, which the French investor has interpreted as involving the dcvalution of the franc. This French monetary unit has been in tribulation for years. Before the war the mint par of exchange was 25 francs to the £; after the war. when the franc was again linked to gold, the parity was a little over 124 francs to the £. Last Septeinbei, when the tripartite exchange agreement was arranged, another change was made and 105 francs were equal' to the pound sterling. The franc lias fallen recently and the quotation at the week-end was 110 francs to tho pound sterling. Tf there is a continued flight from the franc there is hound to he a further fall. In any i ease it will .be .of interest to see how | M. Bonnet, the new Finance'Minister, j deals with the situation. These perio-1 die disturbances arc hound to continue, and the onlv way to prevent them is to definitely decide upon an international monetary unit and link all currencies to it. But how far this is not practical polities at present is obvious. For this purpose gold is incomparable. TRADING BANKS.

The returns of the six trading banks in the Dominion for the month of May when compared with those of last year show seasonable variations in the figures.'

Dealing first with the deposits, the demand, or free deposits, are shown at £36,667,413, as compared with £31,583,672 in May of last year, an ini crease of a little more than £5.000,000, I but compared with 1935. when the ! total stood at £26,374,850, there is | an increase of about £10.300,000. It I was in the latter half of 1935 that we had the first real indication of economic recovery; it became very, pronounced last vear, while this year there has been a combination of factors to account for the increase of over £5,000.000. The past wool season was exceptionally favourable, the ch'n yielding a substantial amount. Other of our primary products have also sold well, and there has been more money about. In addition to this the general wages scale has been raised, but against this prices show an improvement; that is. retail prices arc higher, conseouently traders find it necessary to hold more readily available capital. The time or fixed deposits again show a contraction, which has been a feature of. this c’ass of bank deposits. At the close of May tihis vear the fixed deposits totalled -f'32.505.506. as compared with 636 675.282. a decrease of about £4.000,000. The relative positions of the free and fixed deposits have changed, the free deposits being greater than the fixed deposits. The total deposits at the end of Mnv amounted to £69.172 919, as compared with- £6B - 258,954, an inprease of less than

£1,000,000. This seems to be due to the holders of fixed deposits finding other investments, largely in Australia. The advances compared with May of last year show an increase of about £3,000,000, the figures being £48,033,OG4. against £44,970,790. This increase would be due to the higher costs of local and imported goods, raw materials, etc. The note circulation at £9,040,074 shows an increase of about £2,000,000, the figures for May last year being £7,104,827. Owing to rising retail prices and other increased costs people need to carry more money in their pockets to meet current expenses. There is an apparent increase in the spending power, but whether more can bo purchased with the money is quite another matter.