The Stratford Evening Post WITH WHICH IS INCORPORATED THE EGM0NT SETTLER. SATURDAY, JUNE 14, 1913. FINANCE.

Stratford Evening Post, Volume XXXVI, Issue 34, 14 June 1913, Page 4

The Stratford Evening Post WITH WHICH IS INCORPORATED THE EGMONT SETTLER. SATURDAY, JUNE 14, 1913. FINANCE.

In the course of an interesting article commenting on the financial situation, the '"Commercial Record" reminds its readers that it lias often been found necessary to confute the common notion that there must come a crisis in finance, or panic, every ten or eleven years, and goes on to remark that if the commerce of a country is Avell managed, as, on the whole it generally is in Britain at &,.y rate, and if adequate cash reserve is kept against banking liabilities payable on demand, we may believe ourselves safe against such catastrophes. But there is nevertheless a great trafcli at the bottom of the common notion. There is no reason to fear periodica? cvcles, in one part of which the rate of interest is! exceptionally low, and in another parti of which it is exceptionally high. The] beginning of the cycle is a depression! in commerce that lasts for a considerable time, no matter how it is caused. Proceeding, the "Record" says: In a. declining country—a country! where depression was the ordinary, condition of trade, and prosperity was

I the exception,, all the phenomena I with winch we are dealing would be j reversed. But happily at present we j need only to consider temporary depressions on commerce in this ; we need not consider the case of a permanent stagnation or a steady decline. And when trade once begins to augment, Hie ratio between the savings of this country and its investments very soon tends to lie altered. The. effect nil! for some time be scarcely perceptible; the accumulation of savings during a long period of depression is usually considerable, and it fakes a large increase of new trade demand to make any marked impression upon it. But 1 th.' amounts of capital used in our trade are so large that after trade! has been growing for any considerable time tlio consequence is certain to be'

scon. Much more trade means many more "bills" ; many more "bills" mean a a great increase of demand, which w will not usually be compensated by a ii counteracting new supply, and the t value of money will rise. This is the ] first step in tho cycle, and the next i question is, "Why should there ever j 1,0 any other step?" as owing to the. 1 recovery of trade the value of money} ' has risen, we will suppose, to a mod-; erate sum, why should it ever exceed that sum:-' Tho answer is that the ; 1 commerce of this country, when once 1 started out of depression, augments faster than the savings. The pros- : perity of each trade acts as a stimulus to that of every other trade. In times of depression much of the capital and of the labour of the world is lying idle; as the depression ceases, that increased labour and capital are called into action. The advance of trade A stimulates trade B, because those employed in trade A buy of trade B; that of trade B stimulates that of trade 0 for a similar reason, and so on through almost a ll trades. An enormous aggregate of new demand for money is thus awakened, but there is no similar increase in supply. 1 The savings of the world always bear but a small proportion to its an- , nual production, and if you greatly • augment the annual production, you will cause the difference between that and the annual saving also rapidly to augment. If the two augmented at an equal rate this would happen, and it is still more true when the larger is increasing much more rapidly than the smaller. At rapidly augmenting - periods of national industry the value of loanable capital augments, because the supply of it increases much more slowly than the demand.