The Daily News WEDNESDAY, JUNE 3. WHY MONEY IS TIGHT.

Taranaki Daily News, Volume LI, Issue 139, 3 June 1908, Page 2

The Daily News WEDNESDAY, JUNE 3. WHY MONEY IS TIGHT.

The Auckland Observer has an interesting article «u the aliove in its lust issue. It say* there is more than meets the eve in the present stringency ill the money market. Some of tile causes of. the tightness of money are, of course, on the siirlace. With a diminution of between two ami three millions in the returns coining to our wool-growers ami hemp-millers for their output, it goes without saying that the amount of money in circulation aiming the general public is restricted, and the result is seen in ;i congealing of regular current j of business, and a. cooling of the spirit of enterprise. Also, the deaning-up which is taking place in certain pail:, of the J)niniuiou niter the hustle of hind booms will account for a great deal. There is, however, another inllueiice a I work, and ;■ very potent one. To pill the matter bliintlv, the bank's have n.solnlcly set their faov against the speeiilalivc policy of the Inn'few years. and arc making their power fell, 'i'liis fad has nunc home forciblv within the I last lev. weeks to all who have hail occasion 'o solicit accommodation for the purpose of new business enterprises. -\o matter how richly gilt the edges of any security that may lie offered for loans, the minks will have mine of it. None but mi old-established customer Is now able to obtain advances, even ui the most alluring rates of interest. When first this stony sternness on the part of financiers became evident, it was naturally attributed by applicants to the approach of the annual washing-up peri--1 od at the end of March, when borrowers are accustomed to feel the pinch of the bank screws. That theory, however, will not serve at this time of the year. Toe only explanation, that fits the case i» that the withholding of new advances is a matter of settled policy, and the unanimity with which it is being adhered to by all the banks in New Zealand is suggestive of a concerted arrangement. On the face of it, this closing up bv the banks of remunerative channels of business is opposed to their own interests. The lending of money upon proper seenritv the very ' raison d'etre' of a bank. 'The fact that even the most solid securities are rejected 1 compels one to look for motives outside | the ordinarv considerations of business.

and they aie not hard (0 find. One of the most probable reasons that has been suggested is a desire to "bring the (!ov eruuient. In its bearings" with regard to its method of financing. It is no secret that the banking institutions have long resented the policy of the (Government ill raising the bulk of the loans required tor public works from colonial institutions, and lluis diverting into the public Treasury by the sale of its debentures money which, ill the ordinary course, would find its way either into the banks by way of deposits, or into business enterprises. Another grievance that comes under the same beading is the attracting of deposits into the Post Office Savings Rank by offering higher rates of interest than the bankers consider legitimate, and the mopping up of the money so invested by the Treasury. Again, there is the sale of Consols across the counter. All these methods ot tinancing are. in the eyes of the banker, encroachments upon his proper preserves. If. he would say, the money is rec|iiired lor public purposes, it should hi' raised in an open way in the London market, thu- leaving the privatelyowned capita! of the Dominion free to circulate in the course of business, in--Irad of locking it up in (loveriiiuent deposit-. And there are many people, older than the leaders of linance. who hold the same opinion. The institution of the new policy ou (he eve of the fJenernl Election is highly significant. Evidently, the object is to bring political pressure upon the Covcrnmcnt. through the public, for the amendment of its methods of financing. How far the tactics of the bankers will be successful remains to be seen. That they hold very strong cards in the game cannot, be denied. It is largely upon their capital that the eoiniininitv is trading, and if they withhold it from the private investor it seems pretty certain dial, their aclion niu-l check Hollow of private moiiev Ifi the (iovciu nieiil in-tilutions. in tli.it case the Slate will be obliged lo do its financing in the outside minii'v market. That lienor may „..( male lor cheapness ill loanlaising. but H will at any late nvaii great-r openiie-s, and will probably do good in the I'iid.