SEIZING CALL MONEY.

Taranaki Daily News, 17 June 1921, Page 5

SEIZING CALL MONEY.

A FINANCIAL BOOMERANG. HOW IT IS WORKING OUT. PARALYSIS OF TRADE AND UNEMPLOYMENT. There is good reason to believe that some part of the unemployment and a great deal of the paralysis of trade from which this country i a suffering at the present time are due to the action of 1 arliament- last session in summarily impounding the moneys at call with trading companies, financial institutions, and local bodies. There may have been sound reason for the action taken, but whatever the advantages in some directions, these have been more than counterbalanced by the harm done in others, says the Wellington Times. If the legislation had been confined in its operation to money on fixed deposit, there would have been infinitely less injury to trade, because deposit money is almost solely investment money. But money at call ig not in any sense investment money. It is properly represented by credit trading balances, which are required for use within an immediate period, and which are put out to earn low interest till required in trading operations. The consequence of impounding these call moneys has been to embarrass businesses that were thoroughly sound and solvent and to handicap them for the benefit of other businesses possibly not so solvent and certainly not so prudent and far-seeing. The effect has been, in many cases, to compel the , curtailment of working expenses and cause the discharge of many hands who would otherwise have been maintained in employment during the stringency. One employer who was spoken to on the subject said he had been compelled to let twenty-five hands go because his working capital which he had lent at call had been impounded, and he knew of other employers in a similar position. In other cases, people who had bought sections and were arranging to buiid houses were compelled to abandon this intention because their building capital was lying at call and they were prevented from getting possession of ifr. This accounts in a large measure, an architect told us, for the sudden paralysis of the building trade. Whatever good purpose may have been contemplated by the legislation, the method pursued was crude and short-sighted, and has caused a great deal of hardship in business and much unemployment. It has also prevented certain business men from taking up their shipments of goods on arrival, and has forced them to sell in the auction rooms to raise the purchase money, though the cost of the goods was lying as capital at call. One of the anomalies of the legisla-, tion is illustrated by the fact that local | bodies were enabled to hold call moneys I against the owners at a moment when their annual rates were pouring in and; they were in possession of ample fund?.. In a sense, this was encouraging them to continue a policy of extravagant expenditure when the public interest demanded economy. It is equally anomalous that money-lending firms’ were given possession of loans at call till the enft of the year at a nominal rate of interest and have been coining money by lending j at 15 and 20 per cent and even higher interest.

It may be urged that there is a clause in the Act enabling owners of capital to apply to a judge in chambers for the use of their money in cases of hardship. “But,” as one business man says, “this is a fine thing for the lawyers and a bad thing for the owner of the money, Who is prepared to face the expense and worry of going to court to fight for his own money, just as if it were in Cliaftcery, and incidentally allowing the lawyers to get their cut out of it. Ear better to leave it where it is, whatever the hardship may be, and reduce expenses in other directions.” This is certainly what ha* been done. As an inevitable consequence, trade is suffering, and unemployment is being unnecessarily intensified. “The whole trouble,” angrily declared one sufferer, “is that the banks were anxious to put an end to private banking, the growth of which they had been regarding with jealousy, and in assisting them in this direction the Government has done more harm to the country than it will be able to repair for the. next five or ten years. ’