The Daily News. TUESDAY, MARCH 8, 1921. BUSINESS CONDITIONS.

Taranaki Daily News, 8 March 1921, Page 4

The Daily News. TUESDAY, MARCH 8, 1921. BUSINESS CONDITIONS.

In the latest Review of trade and financial operations in Britain, the outstanding feature appears to be that the money market is very short of credit, owing to heavy withdrawals to meet the payment of taxes, while it is satisfactory to note an improvement in the dollar and franc, mainly due to the conditions affecting international trade. This steadying movement has been awaited for some time past, and is indicative of a slight advance in the direction of stabilisation, more particularly when viewed in the light of a decline in prices of goods. The immediate problem is that of price reduction. The more goods that, are brought within the purchasing power of the community, the greater will be the volume of trade, which is the life-blood of every nation. There are certain fixed laws governing business and economic conditions, and the violation of any of these puts the whole outyof gear. Referring to the financial and economical position as it existed in November last, the circular letter issued by the National City Bank of\New York practically covers the whole ground relating to general business conditions, and the conclusions arrived at' are based on sound knowledge, mature judgment, and a keen appreciation of cause and effect. These conclusions may be summarised as follows: —Prices have been declining since September, and unemployment is reaching proportions which will affect consumption. The decline in the value of farming products impairs the purchasing power of the producers. The postwar boom, created by the stimulus given to business by the relaxation of restrictions on private expenditure, the large expansion of Government expenses, the genera! rise of prices, the demoralisation of exchange rates, the delay in reestablishing industries in Europe, the poverty of European peoples,, social unrest and threats of revolution, has culminated, and the inevitable reaction set in, yet the world’s demand for goods is still unsatisfied, nor will it be met until prices are within reach of the jjeopla. The American textile in-

dustry has been going from bad to worse, while the wool market has been stagnant since May last, all holders of wool having been losers. Hides are down to pre-war prices, and leather values have closely followed. The two important elements of uncertainty are the labor situation, with its possibility of reduced earning power, and the attitude of the retailers in maintaining prices in order to avoid losses on goods purchased at boom rates, but it is anticipated that the sagacious dealer will in time turn his stock over as fast as he can replace the goods at lower cost. Inen will come the buyer’s turn, and the creation of a more healthy situation, all the wasteful practices, the cost of which has been passed on to the consumers, being eliminated. There is fairly conclusive evidence of a general determination to postpone buying all but absolute necessaries until costs are lower. At the same time it is unreasonable to suppose that prices are going back, to pre-war levels. The boom period was not due to internal development or construction work; on the contrary it impeded normal development, and never’ before was there so much work in sight and such a dearth of money wherewith to carry out that work. Two powerful influences have been operating adversely to healthy business conditions, namely, foreign exchange and inflated credit, for the very cogent reason that people cannot always pay their debts and buy more goods at the same time, hence the importance of re-stabilis-ing currency and reducing credit to its normal basis. Every authority on monetary science will agree that an increase of the amount of money in circulation, or of bank credit circulating as money, will have of itself the effect of raising prices, hence tight money does not prove a lack of that commodity, but is the effect' of competitive demands, so there could be no relief from financial stringency so long as prices rose and no end to rising prices while credit was being granted. Apparently the danger of further inflation is over for the time being, and there is a probability that the strain will gradually become easier until it disappears. The banks are thoroughly conversant with the position and its needs, and it is to their interest to bring about a sound financial situation, just as it is their business not to incur risks with the money which they hold in trust for their clients. On the whole the outlook is encouraging, and the prospects of getting down to normal conditions in the near future appear trustworthy, though much will depend on the manner in Which the workers will assist or retard the only means whereby normality can be reached.