TIMID CAPITAL.

Putaruru Press, Volume VII, Issue 299, 1 August 1929, Page 4

TIMID CAPITAL.

A peculiar position has arisen in the Dominion. It has been a wonderful season for the primary producers. Exports have shown a substantial increase over imports. The banks are holding huge sums of money. Yet there is a general complaint that business is quiet and money scarce. Recently the chairman of the' Auckland Harbour Board put the position clerrly when he ascribed the cause to the fact that capital was driven from rural mortgages by the belief that farm lands are still inflated and nad sought city building investments which had not proved successful, and at present few investments were being made except in local body debentures. In a few words, capital is timid and chary of all investments, save gilt-edged securities. The outside field presented by Australia is not likely to continue to be attractive. Opinion may disagree with the generality that all farming land values are inflated. It may even contend that over-building in cities is not general. But it does not alter the fact that capital fears they are not sound, and since confidence is the soul of credit and the life of investment—the fear is as bad as the fact. Which points out the necessity of the restoration of confidence.

The accomplishment does not appear easy. Many authorities say that rural land values have nc* reached a sound level, nor fully recovered from the war boom. To enter into a discussion on this contention needs expert knowledge. But there is ground for belief that development of much of the uncultivated and secondary lands of the Dominion would provide a reproductive proposition, and from a social and industrial aspect minimise unemployment. But it has to be admitted that proposals of this nature may not appeal to private enterprise. It will.be contended—and with partial justice—that such tasks come within the mission of the Government. It seems, unless there is an alteration in the conditions, that affairs will proceed very much as they have done in the past. Economists of late have put forward a suggestion for the establishment of an insurance scheme insuring against business loss as against fire loss or accident or personal defalcation. It has been proposed that in important business undertakings the Government might underwrite the venture, and, by a form of public insurance, reduce the unnecessary risks and chances. The United States Government in certain ways has already taken steps in this direction. The Federal Reserve system has in a very far-reaching way reduced risks in the field of banking and credit.

In the main such principles would apply more to industrial ventures than land development schemes. And to Government undertakings there is always the objection that the Government would have to discriminate against bad undertakings, unless it transferred its power to a non-poli-tical authority to sift the chaff from the wheat. But no valid reason ap-

pears against the underwriting by the Government against loss of private enterprises developing waste lands. It might provide the guarantee essential to restore confidence in such ventures to capital.