The Temuka Leader TUESDAY, SEPTEMBER 7, 1886. THE FINANCIAL CRISIS.

Temuka Leader, Issue 1553, 7 September 1886, Page 2

The Temuka Leader TUESDAY, SEPTEMBER 7, 1886. THE FINANCIAL CRISIS.

In our issue of last Tuesday we dealt ,with the position of‘ the colony in its monetary relations with other nations. We showed that it was not wealth we wanted, but money ; that we had money’s worth, but that in on- •.’> cumstances we could not use it. in order to understand this thoroughly it is probably necessary to understand what is wealth and what is money. Those who have read political economy upside down, at once will say money is not wealth. This is a mistake. Money is a species of wealth. Without encumbering the mind with the hifalutin of grandiloquent writers, wealth may. be defined in a common-sense sort of way as a means which enables us to satisfy our wants. ..For instance, a man wh possesses a sufficient area of land has most, if not all, the elements necessary to life thereon. Without any assistance from the outside world he could live on the products of his land, and therefore he has wealth when he has the moans of living. On the other hand, a man having a million of money in gold cou'd not appease the pangs of hunger with it unless he was where food was purchasable with it, If we remember rightly iEsop in one of bis fables illustrates this. He says that there were once two men : one who had a barrel of meal, and another who had a barrel of gold, and no more food was procurable at any price. The man who bad the barrel of gold offered it for the barrel of meal, with the result that the purchase was completed, The man who sold the meal starved to death ; the man who bought it. livid, and became possessor of the gold after the other had died. This illustrates pretty well the point which we wish understood. Money is wealth provided one lives where the needs of life aie purchasable by it, because it is

capable of securing wealth, And not only that, bat it is the safest, the handiest, and the most useful species of wealth. A man who owns a farm possesses wealth, ns we beye sin wn, bn* he cannot take it away with him to England. If be lias a sum equivalent to its value in money he can pack up at a moment’s notice, and set sail by the next boat. Money is valimb’o only inasmuch ss it enables us to purchase what we require. It obviates barter, and facilitates the exchange of goods. It is useless as an article ’of diet, it is not suitable for making suits of clothes of, but it is capable of purchasing both, and its purchasing capacity is its only value. In domestic commerce it. takes the form of cheques, bank no'es, bills of exchange, etc., in fact it is made principally of paper.. Gold is supposed to be our ! medium of exchange, but we seldom see it. Sir John Lubbock, the great London banker, says that per cent of his banking transactions comprise paper money. Thus gold plays a very *sm»ll part in our domestic exchange of goods, but when we come to transact business with foreign nations nothing else will he of any us r ’. if a man sends to England for goods paper will not do, lie must have gold. Bonomy Price, ' probably the bi s> authority on the subject,; says “ Gold exercises a most valuable function in liquidating the balances of-inlernational trade. All trade, as between' individuals so between nations, is an exchange of property, of wealth, and of goods. Eyery nation buys abroad with its own products, its own goods, and it has nothing else to obtain its'purchases with. When a country has mines of gold, gold passes as a product just as cotton or Wine. If the buying equalled the selling, every day the accounts would always be balanced of themselves, but as purchases with one single foreign country Are not always equal, there remains on a given day a balance to settle, and that is'Hoti" with an export of gold from the country which bought most to the country which has sold most.” Now that is the law which, governs the exchange of goods between one country and another. 'To illustrate it more fully let us suppose that New Zealand bought from England £7,000,000 worth of goods, and >ll the grain, and wool, and gold, etc., we could spare after having satisfied our own wants, amounted only to we would have to find £2,000,000 of gold to square the accounts. We have 1 now quoted perhaps the greatest authority extant on the subject to show that the arguments we have hitherto been using are correct, and it proves that it is impossible for us to go on as we have been doing. We have shown that all the money we have ever borrowed has gone to pay the annual balance against us, and now let us ask ourselves what would happen if it were stopped ? The day must come when English money-lending companies will advance no more ou land in New Zealand—-in fact we.ought to be nearing the time now, considering the vast sums already lent. : The general manager of the Bank of New Zealand said there was no room for investing money in this colony at present, which amounts to saying that property was already mortgaged to its full value. When these companies have ceased to lend, •it is not very likely the credit of the colony will remain good, and the Government will therefore be unable to borrow. Then the position will be this : No one will be borrowing, and the banks thetnselves must borrow, or they will not be able to perform their .functions. Somebody must borrow the money ; it must be got, and when all else fails the banks themselves, must do it by offering a high rate of interest for fixed deposits. •And even then-the day of judgment must come. The first moment a suspicion arises in the minds of the depositors a panic will set in. ; the banks will not have gold, and the result must be a general burst up. Would it not be better to take immediate steps to avert this? This is what we have been trying to impress upon the public mind, but we are afraid nothing will be done until it is too late.