The Taihage Daily Times AND WAIMARINO ADVOCATE. SATURDAY, DEC. 11, 1920. THE, FINANCIAL SITUATION.

Taihape Daily Times, Volume XII, Issue 3650, 11 December 1920, Page 4

The Taihage Daily Times AND WAIMARINO ADVOCATE.

SATURDAY, DEC. 11, 1920. THE, FINANCIAL SITUATION.

With which ia incorporated “The Taifeape Post and Waimarino News.”

• Ex» cathedra pronouncements made by the Chairman of the Bank of New Zealand are always of great public interest, but. it is more than doubtful whether in the palmiest or most depressing days of the banks history the bank chairmanfs annual and semiannual . epitomisations of the try >a financial, commercial and industrial condition have been so anxiously looked forward to by a deeply interested and concerned people and press as they are at the present moment. Viewing the speech delivered yesterday morning as a whole its purport is obvious; it leaves no doubt about two aspects of the immediate future; one is that the happy times of high promts and consequent revels in luxury are at an end for the trading community and local governments, but not so for banks and capitalists generally. The time of reaction has arrived; a squeezing down process is to be applied to this Dominion's primary pro-ducers;-there is to follow from now on. a period of low prices for wool anff meat and rather alarmingly dear money. By some subtle means there has come a slide back to financial conditions such as obtained many years ago, before the Seddon-Ward Government came into power an a brought in for settlers an era "of cheap money. Those days were particularly notable for exports at poverty value and money at highest value. Those who have a . vivid memory of the circumstances farmers were placed in during that time wlir regret that the financial, commercial and industrial curtain has alreaay commenced; to rise upon a similar scene. It is but a natural corollary that bankers as well as producers should expect to enjoy profits in accordance with money's world parity ■ value. If interests ruling 'in New ] York and London are eight per cent, banks and capitalists in New Zealand j must have their eight, per cent., and there must be no grumbling about it. The trading community persistently claimed their right to parity value and they took it, therefore it is not reasonable for them to deny a similiar right to capital. From the nature oi Mr Beauchamp*s remarks upon capr£al it is apparent that, say what they may, this finances are fn a parlous, if not a desperate condition Whether for good or ill the "Bank of New Zealand Act," passed last session of Parliament, somewhat revolutionises old, safe banking methods. It per* mits the capital of the bank to be immensely inereaed, and sequentially an increase of share value to proprietors without their\ having contributed a penny thereto. There are evil-minded people who will seize upon this rearrangement, which increases the bank's capital and takes away its reserve, fund, spitefully; or there may be sensation-mongers who will use It i in gaining quetionabTe notoriety i amongst unthinking people. But view- ! ing this change in banking method without prejudice, reasonably and interestedly, it will be discovered that the extraordinary state of the Domin- • ion's finances have brought the .bank to the rescue, and so that the maximum in the Dominion's best interests could be achieved the bank submitted to the Government an empowering measeure to free capital tied up so that it might be available during the period of severe financial stringency I the Dominion is now entering upoa. That banks ana capitalists generally ! are to have a Tdhg period of high totere'sts. in other words, high profits on the money they lend to either individuals or governments, is something, more than incidental., but it is perfectly in accordance with established financial usage, and not opposed to what happens in the operation of the j law of supply and demand. That there is a serious dearth of money in New Zealand is dismally apparent; trie very fact that a largt increase in tlio bank " note issue is ' foreshadowedshould leave no doubt in any mind upon that point. We mean money that is available in the ordinary way; it is well understood that a new army of capitalists have sprung up in New Zealand during the war as a result of profits so outrageously high that they may justly be termed dishonest. Boarr? of Trade proccutions of profiteers have .had virtually no effect upon the orgy of commercialism which is not yet. extinct. Banks have made a greater volume of profit but. it is because they did an immensely greater volume of business; thy did not levy higher interests nor did they charge more for their services. Banks made profits, because business came to them through the high-profit-making of

j others, and now banks will xuake high-. ier profits because the world's i parity of money value has increased i and will operate in New Zealand even ! though banks were ranged against j it. Therefore, banking will still continue an exceptionally profitable bus?- ; ness because they could not stem the law of supply and demand if they i would. It is not the profits or losses j that banks and individuals are making ' that are the paramount concern of New j Zealanders at the present time; it Is I the fact that the State is in an ex--1 tremely impecunious position. Harking j back a year or two we find the Prime Minister, and the Minister for Public ' Works, from their places in Parlia--1 ment, and from their speeches all ! all over the Dominion, proclaiming a 1 super-abundance of money. Later | when the Minister of Public Works j was twitted about money for important national works he non-chalantly pooh-poohed th'e suggestion that! he hadnj't heaps of available money; his trouble was that there was no labour available. The Government was going to have so much money that it did not see how it was going to "be spent, and to make sure of it being put into use local bodies throughout the country were advised to prepare schedules of public works and forward them to the Minister so that the huge money accretions might be spent most bene;fically. That money has not yet maj terialised, still, urgent public works (are not commenced upon because local bodies cannot get the money. With what object, is not clearly discovered, but a rate of interest to be paid' by local bodies was fixed, and now the Chairman of the Bank of New ' Zealand discloses the stupidity of trying.to fix Interests by Act of Parliament. Mr Beauchamp has touched upon a situation that is axiomatic; money owned by the new, as well as the old army of capitalists is not going to- be invested at sj| per cent, in New Zealand while 8 per cent, is clamourously offering in other countries. 'With the Quixotic financial policy persisted in during and since the war a few have become inordinately rich ana *he many have become poor, ; and thoughtful people Ihust feel deep.ly concerned about the hundreds of , soldiers who have taken up land at what* should be plain to everybody I are impossible prices. Mr Beauchamp 's remarks upon the subject of capital and the future financial position of the Dominion should give cause I for much thought. He, like Mr Massey, is hopeful, but he distinctly j Warns the community of the hard, j evil days ahead. He points out that jit is imperative that imports must cease to preponderate over exports; i that there must -be rigid practice of j of economy and yet the whirl upward of wages and prices still continues* f Imports, can only be paid for by ex- ; ports, and difficulty is being experi- , enced in financing present trade. Huge I sums are required for paying foreign creditors; greatest, scarcity prevails in j money for urgent public works; money is not available in requisite quantity for settling soldiers;, the exchequer is empty while people are being fleeced through the Customs; in face of all this how is if possible to keep down money values? New Zealand has virtually no credit in London; the nest egg of some sixteen millions the Gov- j ernment has spent, and the large | credit usually maintained by the bank j has been used up in financing Domin- j ion interests. The speech of the J Chairman of the Bank of New Zealand, delivered yesterday, is distinctly drab despite the effort -at colouring .sougnt to be given to it. Above all it should induce popular thought and action with a view fo launching upon evil days and hard times under the be'st possible auspices.