The Southland Times PUBLISHED EVERY MORNING. Luceo Non Uro. SATURDAY, JUNE 19, 1920. A CHECK TO BORROWING.

Southland Times, Issue 18853, 19 June 1920, Page 4

The Southland Times PUBLISHED EVERY MORNING. Luceo Non Uro. SATURDAY, JUNE 19, 1920. A CHECK TO BORROWING.

Unless we arc very much mistaken Mr Harold Beauchamp at the annual meeting of the Bank of New Zealand foreshadowed an effort by the banking interests of the dominion to put a check upon unnecessary borrowing. Mr Beauchamp discussed the present day problems at some length and his remarks should be taken seriously into consideration by the people of the dominion. Unlike many students of economics, he docs not nominate any one circumstance as the cause of the high prices now ruling, but sees a variety of causes, all of which must be dealt with if any improvement in the position is to be effected. Some of these causes are beyond our control, it is admitted. hut there is one at least for which we in New Zealand must accept a full share of responsibility—extravagance. It would not bo just to confine this criticism to people who go into shops and purchase articles that are non-essential, who devote time and money to (he pursuit of luxurious amusement. These things may well be curtailed as part of a scheme of economy, but they do not represent a very big item in the financial affairs of the country and it is not through them that any great downward movement in the cost of living can be secured. We have been told over and over again that the deflation of the cur- , rcncy is an essential preliminary to the restoration of satisfactory financial conditions and a revival of trade and industry, and as part of any effort to put the currency in better shape there must be some check upon borrowers, both government, public and private. A little while ago some of the leading banking institutions in the world put restrictions upon facilities for speculation and the effect of their action was at once noticeable. The reduction in the supply of money for speculation tipplied a check at once. Lending rates advanced and a downward tendency in the price level of commodities became apparent. Anything in the nature of undue haste in this process, any suggestion of panic, might lead to financial disorders of a far-reaching nature, but there is no need for either. The application of rest riel ions on borrowing will probably have the effect of enhancing the value of money, and this will in turn give additional weight to the brake upon speculation, so that the progress to more stable and less dangerous financial conditions should bo steady and continued. The public only require-; to be confident and patient, and to follow the advice of its experts and no hurl can come to it. The upward tendency of money is already apparent. Mr Beauchamp in his review of the position of the money market points out (hat the Bank of England rate is now seven per cent, to which it was raised from six per cent on April 15. “The British Government,” he adds, “is paying Gt per cent on its Treasury Bills. Its Exchequer Bonds with a currency of two years are reported to he yielding over 7 1 per cent jo the investor, and flat loans with a currency of 25 years and more are returning to the invertor £6 (is fid per cent.” It is impossible for this country to avoid tiie effects of this upward tendency 'and it is to our interests that a cheek upon unnecessary borrowing should be applied here as it was in England. It seems abundantly clear to us (hat tin's policy is to be adopted by the banking institutions of the dominion. Mr Beauchamp’s foretelling is not obscure in its terms.

All borrowers, both Government, public and private, must be prepared to pay higher rates for future accommodation. The fairly certain contingency of higher future rates should prompt a very careful scrutiny of the circumstances surrounding till contemplated undertakings, whatever their nature may be, involving the employment of iwrrowerl capital, in order that would-be-borrowers may first satisfy themselves that the project in hand is likely to prove sufficiently profitable to justify the heavy handicap which the cost of the necessary capital is likely to impose. In the case of Government undertakings, it is important that the authorities should be on their guard to resist any political pressure designed to force them to embark in ventures which could very well be left to private enterprise.

If the Chairman of Directors of the Bank of New Zealand means anything here, he mean? that the example of the banking iastitutions in the Old Land is to be followed. It is quite possible that Mr Beauchamp’s remarks regarding government undertakings will be taken by some of our Radical friends as an attack upon nationalisation proposals. As a matter of solemn fact they are. But Mr Beauchamp is thinking not so much of the possibilities of profit or loss in State enterprises so much as ol

the facilities that a government enjoys over private enterprise for the obtaining of money, end ihe greater difficulty of check mg borrowing by the State. The app'ica (ion of checks to private borrowing is not a very difficult matter, but the State, under severe political pressure, may be induced to float loans for schemes in which private enterprise could accomplish a great deal more without imposing upon the country additional financial burdens. - The latest issue of the Abstract, of Statistics informs us that the rate of increase in the cost of living shows a falling off and therb seems to be n fairly general impression abroad that the price level is now easing. If this is so, anil all the evidence points in that direction, the remarks made by Mr Beauchamp will have increased weight, and they will lead us to hope that the problems, that face us are being grappled with firmly at last.