The Daily News. SATURDAY, JULY 17, 1920. THE FINANCIAL BAROMETER

Taranaki Daily News, 17 July 1920, Page 4

The Daily News. SATURDAY, JULY 17, 1920. THE FINANCIAL BAROMETER

The publication of the banking returns for the Dominion in respect of the quarter ending June 30 last, and the simultaneous cable message from London concerning the financial position in Britain at tho close of the half year, should engender a feeling of confidence in the future. So far as the Dominion is concerned, the figures reveal a most gratifying influx of money, as the result of the realisation of produce, the excess of doposits over advances being little short of twenty millions sterling, which is more than a million in excess of the previous quarter, and jjine millions above tlje figures for

a year ago. The full significance of the growth of New Zealand's prosperity can be realised by comparing the amount of the free deposits (current accounts) in the June quarter of the present year with that of 1914 when it will bo seen that the rise was from £l4, 698,7*0 to £38,354,182, a difference of nearly twenty-four millions in the right direction. There are several reasons why such n strong financial position Is advantageous at the present time, the chief being that all loan money required by the Government will have to be raised locally; the tapering off of the payments foi produce by the Imperial Government and the necessity for the banks resuming a certain amount of financing for the producers; the jieed for the employment of capital in secondary industries, and being in a position to meet the cost of the increasing imports. The increase in the cost of imported goods is indicated by the growth of the advances made by the, banks last quarter, the total amounting to £33,459,188 as against £22,139,666 in the corresponding quarter of 1914, and this item is bound to expand as the import total rises, though it is likely the banks will exercise a cautious policy to cheek speculation by imposing high rates of interest. The most important feature of the returns is the relationship which deposits bear to advances —the deciding factor in the, available money supply. This also appears in a satisfactory light, the excess of deposits for the June quarter of the current year being nearly twenty millions as compared with a little over a million and a half in the corresponding quarter of 1914, increased prices being mainly responsible for this satisfactory result. The only feature of the returns that provokes unfavorable criticism .is the large increase of paper money in circulation among the public. Out of a total note circulation last quarter, amounting to £7,926,474, only a little over a million was held by the banks. While in 1914 the note circulation was £1,699,809, the coin and bullion held by the banks amounted to £5,500,450, the coin and bullion for 1920 being £7,740,848, or £185,626 less than the paper money. This cannot be regarded as satisfactory. When money is so plentiful as it is in this country, the margin should be on the right and not the wrong side, and it is high time that a large proportion of the grimy, tattered and evilsmelling notes were committed to the flames. Still deflation must necessarily be a slow and possibly —to some—a painful process. The general position is one! that other less fortunate countries may well envy. Turning to the financial situation in Britain, it is pleasin'g to find reliable indications of recovery from the tremendous strain of the war period, the close of the past halfyear showing the usual abundance of funds in the money market, which was then less apprehensive regarding the future than a fortnight previous was feared would be the case. The Stock Exchange showed more cheerfulness, activity and steadiness, the market being more confident, and dealers believing a better basis had been reached* Apparently it is considered that the abnormal industrial profits have reached the limit. It *is to be hoped that they have, for the high cost of living h'as a decided tendency to foment trouble among the workers, both in Britain and the Dominion, who are increasingly keen on securing a greater share of profits resulting from their labor. This is a factor that cannot be ignored, for though the possession of large financial resources by the banks is most desirable, it may prove a dubious advantage.