WAR AND FINANCE.

Taranaki Daily News, 21 June 1915, Page 6

WAR AND FINANCE.

GIIKAT T.itITAIX'S CIiLAT IIENI-'.il-VnlK OK CAPITAL. AVAILABLE Volt BIUTAIN' ANO iii-:si au.ils. cheat and PKomrxi; irc-coync CIIAXi-LS. .STATIiML'NT BY CIIAIKMAN 01' 'i'llK BAXK OF XLW ZLALAXI,. By Telegraph.—T J U'S3 Association. Wellington, Yesterday. In tlie course of his annual report ::t tlic meeting of the Bank of New Zealand to-dav, Mr. liarold Bear.clmnip, chairman of directors of the Bank ol New Zealand, said:—-

The war, in which practically all the Great Powers are engaged, has had, and must continue to have, a very disturbing influence on finance, trade, and commerce. (Ireat and profound economic changes have occurred, and no one can has yet faintly estimate the far-reaching cll'ects of the titanic struggle.

The measures adopted by the British Government to meet the financial dilliculties precipitated by the war, were outlined briefly in my last address. They have proved, on the whole. e!V<>itivo, and have -cur far to assist in maintaining the ;T-i r.iincniv of London as tin- world's great financial ceulre. Whilst othc c amines liave foui-d U neccssarv to prohibit li'.e export ef gold. Britain iias preserved its traditions, and maintained throughout a free gold market, except, of course, for exports to enemy States.

The opening of the London Stock Exchange, which took place on January 1, was attended by tlie imposition of very stringent conditions, designed to prevent the Stock Exchange being utilised as a channel for realisation of enemy securities.

IMPORTANCE OF FINANCE. Recognising tlie important part which finance must play in the war, the British Government has* determined to conserve British financial resources to the utmo.-t extent possible, in order that supplies for war purposes may be available, ns and when required. With that end in view, it lias practically taken control of all new capital issues in Great Britain, by providing that no issue shall be made that has not been previously approved of by the British Treasury. The principle upon which the Treasury will discriminate upon any proposals made to it, will be whether or not the contemplated issue ea.i be shown to be ''advisable in the national interest." This regulation, it will be at once seen, closes the London money market to all issues of capital on account of undertakings unconnected with the British Empire, and to those even within the British Empire that are not in close association with Imperial interests.

The result is that the vast stream of credit constantly flowing to London from Britain's world-wide investments is accumulated there as in a financial reservoir, the outlet of which is eontroiV'.l by the British Government. In this way, supplies of that essential sinew of w ir —money —are assured, not only for the British Empire itself, but also for her allies.

The facility with which all needs have so far been fullly met, at rates fluctuating—as far iis the British Government is concerned —from a little over 3 per cent, to a little under 4 per cent., is at once a testimony to the effectiveness of the measures adopted, and to the continued strength and soundness of British credit in these credit-shaking times.

I do not wish to be understood as minimising the serious financial and economic bearings of the position in which tho world has been placed by the war. One cannot but regard with serious misgivings the diversion of such immense volumes of capital from remunerative intcrprise to the business of destruction, which leaves only devastation and no tangible asset in its wake. THE MIND STAGGERED. The mind is fairly staggered when it thinks of the economic problems with which the civilised world will be faced when this—the greatest of all warslias been brought to a termination. The figures that will be represented by the actual war expenditure, by the loss of income resulting from the paralysation of industry, and by the enormous value of property absolutely destroyed, are at present quite unthinkable; and when we add to them that greater, because irreparable loss, not measured in money but in human lives, we turn from the contemplation of it all with a distracted brain and a sickening heart; For us, the only consolation lies in t ! ie fact that the conflict has been forced upon us; that we are fighting the fight of liberty and justice, and that with the victory which we confidently anticipate will be ours, may come an assurance of an enduring peace which, in years yet to be, «HI iii-Min" condensate in some measure for the losses and distresses of the present.. THE ULTIMATE ISSUE.

As to the ultimate issue of the conflict, I do not think there can he anv room for doubt, if the British natio'.i can be brought to realise that the greatest crisis in its history has arrived. At the opening of the war every Britisher faced the position with a confidence born of past experience, in the conviction that tile nation would rise as one man to meet the emergency. I am, however, bound to confess that a feeling of the keenest disappointment and to some noprehension when I read of the recrudescence of labor troubles in Croat Britain at such a critical juncture, and of the consequent threatened deficiency in th.j supplies of those munitions of war which are absolutely indispensable, if our brave soldiers at the front are to fight their battles successfully. I can conceive of no more despicable conduct than th.it which would leave our armies and navies deficient in the supplies of the fighting material necessary for their own defence, and for the successful prosecution of the war. I hope that there will be no further display of such un-British conduct, but if there should be, I trust that the most stringent measures will be adopted to compel labor to give the full, generous and loyal service which the nation demands, and undoubtedly merits, in the, present time of stress. In this connection, it is interesting to note the appointment of the Eight Hon. David Lloyd George as Minister for Munitions of War, a portfolio of th« British Cabinet which has been created for the express purpose of dealing with the difficulties to which I have alluded.

THE EFFECTIVENESS OF THE NAVY. The unceasing vigilance of tile British Navy—the effectiveness of whose watch and ward is a matter of pride and satisfaction to tho whole British Empirehas afforded protection to the British Mercantile Marine; and although soma losses have, of course, occurred, the total is insignificant when compared with the aggregate sailings. Up to the present the Kaipara and the Tokomaru are the only New Zealand ships that have been sunk by the enemy. The debt we owe to tho sailors of tho British, Australian, and Japanese "Navies can never be repaid. The British Government, feeling the importance of confidence as an essential to tho maintenance of trade, announced

;;:,„;;! M ■ I'', .! 0 lilO ioWCSt |lOS',lble l'.l'. • S ~,n.si>ient villi dopartmcuinl solvency. !his facility has been of tlie greatest assistance {., shippers m nnd from ad | i;H -ts >.f the ib'iti-h i-'.uipii'c. Jt ice.'.n.iblul tie m to obtain full cover To ~11 their sii.pmenls at. reasonable rale. It is oiiesia-nabic v. nether, without it, unocAic could ha ■. c been able 1-

,:,ect (he demands upon them. In any case the rales for war risk would provide hau- men at the disposal of ,Ul shipping customers, and the aggregate of war risk cover olt'cctrd in London through the bank's agency has reached a large total. NLW ZEALAND IMLAKUIiKei, The incisures which it was found necessary to adopt in this Dominion, viz., The Notes, legal tender proclamation, The prohibition of gold export, and The .Mortgages Lxtension Act, are still in operation, and likely to be continued until tlie close of the war at any rate.

'i he last named Act has, unfortunately, proved somewhat unsatisfactory . Designed primarily for the, protection of mortgagors against possibly unjust and arbitrary action by mortgagees, it has no doubt been of much service in preventing hardship to mortgagors whose liabilities wire maturing, and who were unable to moke provision for them. It has enabled them to carry on their nielt-

e,;ues at the rate of interest provide! hi the inort:;a;:e deed, and has, in that way, no doubt'assisted to keep down the value of money for mortgage -purposes, which runs to-day at from 5 to li per cent, per annum. But tlie Act has been taken advantage of by quite a number of mortgagors who, being in the enjoyment of .a low rate of interest, have, whilst possessing the means to discharge their liabilities, claimed the protocti.m of tlie Act and utilised their available •funds in lending on mortgage themselves at higher rates of interest, mis is, or course, a perversion of the benefits eo<iferred by the Act, and it is understood that, in the coming Parliamentary session, the matter will receive attention at the hands of the Government.

We are not at a|l sure, that the mortgagors in such eases are not over-reach-ing themselves, or that those who arc bona fide claiming the protection gf the Act are wise in doing so. There is no reason to anticipate that a substantial drop in money values wlii take place after tho conclusion of the war. Not A few in a position to judge take the view that there will then be still further appreciation, and my opinion is that those who are re-arranging their mortgage liabilities, as they mature, on the best terms possible, are acting with l a measure of prescience which futur'4 events will fully justify.

MOItjSY VALUES WILL REMAIN HIGH. The prevailing conditions in the great monetary centres of the world are bound to be reflected, sooner or later, in our local market; and, as I see no.indication of easing prospects in the centres, 1 am forced to conclude that money values are likely, for the present to remain comparatively high. It is true that there is not > in the meantime, any shortage of money; but this is largely owing to the fact that enterprise is stagnant, and that trade generally is running in much resricted channels. When the future is more assured, the supplies of floating capital will probably be quickly absorbed and money may become scarce.

After the war is over, if tlie conditions of the international settlement are such as hold out prospects of a lasting peace, and of cessation of competition in armaments, there may be after a few years a permanent drop in money values, but I do not think that point will be reached for some time. These are, however, merely my personal views, a«d I wish it to be understood that I lay no claim to prophetic attributes.

OUR FORTUNATE POSITION. In those Islands our position is a highly favored one. The horrors of this war —tlif most distressing of all wars—are known to us practically only through the newspapers. But fur the fact that ■sonic of the best of our manhood lias gone forth to do battle for the Empire, and that the list of our dead and wounded is a long one, we should be almost unujl'ected by the momentous struggle that is in progress on the other side of the world. Indeed, it may be truly said that we are actually benefiting by the tragic events that are being enacted, inasmuch as the war demands have sent up the prices of our staple products to a level never before touched in recent years. In this connection, it is interesting to note the values which have ruled in the London market for some of our principal products this season, as compared witii the previous year. Take, for instance, wool, meat," butter, and cheese (March 1013 shown ;;; imreiithoses) :'--' '" »' —"•• '■■ WOOL. Sliped Wellington Wools 13d to I.kl (21d to 24d); Greasy merinos CO's 12.H1 to IV.d (lid to 12(1); greasy cross'broils fme 50-8 12£ d to 13Jd (17d to 17kl); greasy crossbreds medium 44/}(i's 12d to 12kl (md to 18d); greasy crossbreds coarse 3(i/40's lid to lUd (17(1 to md). These prices are for "average" quality per lb. It will be seen, therefore, that the present condition of the market is brought about by the strong demand for wools suitable for khaki and blank't purposes. FROZEN MKAT. Canterbury lamb per Ibb'kl to OJd (73d to Sd); North Island mutton 4d to 4%d (.">3d to (ijd); N.Z. beef fores 3?d to 4d (">,', d to Aid); N.Z, beef hinds 4]d to 4kl ((ijd to li!d). BUTTER ANI) CHEESE. Butter 118s to 120 per cwt. (130s to 142s per cwt.; cheese (ws to (SGs (id per cwt (iris to !>3s per cwt,hand the market for all dairy produce, has since improved. Linked with the patriotic enthusiasm of _ the Dominion these circumstances, which have placed our people in a position to be liberal, have inspired rich

,i!i(l poor alike to a degree of generosity quite iiupreeedeiiled, and substantial ~,,-ns !,„■,c hen voluuta.-ilv subscribed lor cwav conceivable dep irl men! of relief and' assistance. Mindi w-t. ivmai.is to be done, but we are persuaded the New Zealand 'people will be true lo their call and do their duty.

LOCAL BODIES LOA.S'.i • Willi the closing of the London money | ii:::i'.. t, that fertile channel of >uppl; . ,„■ our local Jinaneial requirements, b. , lias become absolutely sealed. We ha a- I consequently no loan dotations L. | chronicle on this occasion. Kor the in- ; formation of those local bodies who may iiave schemes of expenditure in prospect, i: may say that, apart, from the unei-r----taint y of'the war's duration, it is in my opinion exceedingly unlikely that tie London money market, even after tiie termination, of hostilities, will become favorable for the issue of loans for some time. The. demand for capital to make good tlie destruction that has been wrought by the war will be enormous, and the sources of supply will, to some extent, have run dry. It is, therefore, only reasonable to assume that it may be some years before the financial equilibrium is'restored and normal condition.? again prevail. In any ease, when considering the question of loan tlotations borrowers will no doubt have to readjust their ideas as to rates, for when London loans again become possible there is bound to be a great rush for

nppli'-ations, and this naturally will i»sult in lenders demanding higher r'f.es than these which in recent years tiny have been ready to accept.