INDUSTRIAL DEVELOPMENT.

Temuka Leader, Issue 1607, 14 July 1887, Page 3

INDUSTRIAL DEVELOPMENT.

TO THE ELEOrOHS OF GLADSTONE,

BANKRUPTCY. We have seen so far that we have borrowed about 40 millions since 1873. It is very likely that we have borrowed much more than that—in

fact, I am inclined to believe it is nearer 50 millions—but so as to be within the mark I shall put it down at 40 millions, We have seen also that this money never came into the colony, as proved by the Bank returns, and wa have further seen that our exports have not paid for imports by more than 22 mjlliqns. It is, therefore, jndjspntahile that we have paid for the goods we imported, the interest on borrowed money, the in-

comes of absentees, the dividends of shareholders, etc., etc., with the money we borrowed. Now, it appears to me, and it must he patent tq all, that we have arrived at the end of our borrowing tether. To borrow more, either publicly or privately, must mean certain ruin. And now when we have stopped borrowing where will the Banks get the money with which to pay for our imports and th® four millions a year interest, etc. ? political economists will say at once that our imports must lessen, because W« shall not have the In England. Their theory is that a country contracts or expands her imports agreeably to her means of paying for them. The theory is, generally speaking, correct, but it is not infallible, and, so far as colqny is concerned, lam incline! to believe that it will not apply at ahFirst of ah we want a certain quantity of goods, every year, and unless we

produce them locally we must import them. To argue that we shall nol import, and that we shall not manufacture, is to say.that we must go without the goods altogether. Ido not think we shall do that, for though trade is very depressed, and people are generally hard up, still they will, for some time at any rate, be able to scrape together the means of purchasing the things they stand in need of. PAPER MONET.

I find the amount on deposit in; the Banks is £10,789,624, to which must be added the amount to the people’s credit in the Post-office Savings Bank, which will bring the total up to over 12 millions. People with; so much money to their credit in Banks will not see themselves want the necessaries of life, 1 and, therefore,' they must get them. The great difficulty in the way is that this is all paper money, and that this paper money will not be ‘‘worth a snuff” in England. The Banks owe the people of this colony 10| millions of money, but all the coin in the whole colony amounts to about £2,660,000. How much 1 of that is silver and cop'per must be left to the imagination. If the 10v millions were gold, the way would be quite clear, but it is is made up of paper money, and that is perfectly useless in international -trade. The position of the Banks,, as I apprehend it, will therefore be this: they Will owe 10|millions to the people, and if the ; people demand of them gold to pay for goods they have bought in foreign countries they cannot pay it, for they have only two . millions of it in the country. The Banka have assets, certainly—they have promissory notes, deeds of properties, etc., etc.—but these are only paper also. Supposing they were to sell —as sell they will in the course of time under their mortgages, and supposing they were to squeeze the last penny that; is due to them out 6f their clients, that would not increase the supply of gold by one • half-sovereign, unless foreigners come into the colony to purchase the things sold. There are only two millions in .the colony, and. if every man from- Auckland to to the Bluff were writing cheques for a month that amount would not be increased.. It could only be increased by outsiders coming in, and bringing gold with them. Now, supposing the Banks commenced to sell out the effects of those who owed them money, and a general cry of distress was ringing over the face of the land, is it likely that capitalists would come to make purchases, in such a country ? I do not think so, and, therefore, I can only see one way out of the difficulty—and that is that the Banks will borrow in London on.the securities they hold here. BUETHEB BORROWING.

Now, supposing the Banks resort to this means of tiding over the, difficulty, what does.it mean but further borrowing? It means the Banks borrowing on the security of the deeds of the properties they hold, and put of these -properties must come the interest payable on the fresh borrowing. Everything must come out of the soil of New Zealand, and the more that is borrowed the less able will the soil be to bear the crushing weight of its burden. There is another way in which the Banks can borrow. They can take money on deposit in London, but that would not improve matters in the least.,. When: the Glasgow Bank failed the English depositors who had lodged money with the Bank of New Zealand got frightened, and demanded their money, with the result that the “ Colorado Beetle ” was sent out, and his blighting influence was felt from Auckland to the Bluff. The Bank j was saved by borrowed money then, but j if this occurs again it will not have 1 that advantage. Let us suppose, for I argument, sake, that the Banks did ‘ borrow on deposit, or in any other way, to pay interest and buy goods, what must be the result ? They must pay the gold away immediately that they J boryow it, and the next year they will > want more,! The spirits, the clothing, and the other perishable articles for which the money has been paid haye vanished into thin air, and we want

our stock replenished again. How will it be done F It baa been done with borrowed money in the past; no new way of settling international balances has been discovered; it can be got only on the same, lines—it mnst be borrowed, and that means sinking deeper and deeper into the mire. Either the Banks, Government, private individuals, or somebody must borrow if we continue to import goods as we have been doing, and if

we are to pay with borrowed money for imported goods we shall find them expensive in the end. So far my argument has been that we shall want goods, that we have the money to pay for the goods, but that owing to the mad system under which we have hitherto worked this money is only paper money, and only available within the colony, The banker, however, cannot make this excuse. He has undertaken to pay in gold, and when a merchant whose account is in credit calls on the banker to pay for the goods purchased by him in England the banker must do it. He has no resource but to borrow the money, and that must result sopner. or later in bankruptcy. I know our Banks are rich, but there is a limit to their resources, and when 'hat is reached crash they will go, and crash will the whole colony go with them. Unless we alter our way

of. doing business this crash must come; we cannot carry on if we are going, to-the had at the rate of 4 millions a year; oik day of judgment must come, and when it does believe me that those who sing pseoiis over the beauties of Freetrade now will dance to wild discordant music when the English money lender comes to claim bis “ pdund of flesh ” REPUDIATION. There not the slightest danger of repudiation. Such a thing is nonsense. Repudiation would come about by taxation becoming so excessive that the people could not pay it. The people would hen clear out of the colony, leaving their properties behind them. The highest direct taxation yet suggested is only one penny in the< £, and as. the contending political parties are both agreed upon retrenchment I have hopes that the tax will not be in creased. Now will any one leave the colony because of a tax of one penny in the £, or twopence or threepence in the £? I say no! To talk of repudiation is utter bosh, and no one who understands anything of the position of the colony will do it. The people will pay taxation in paper money. The Banka will not be able to fin 1 the gold to pay the interest in London, the Banks will then become bankrupt, and what will follow after that no one can tell. - - The-people as a. whole are well off, they can pay their way easily, and the trouble is that the gold-supply —that is, the exports —is not sufficient to pay sevehimillion's a year for goods and four millions for interest. As regards the Banks they are perfectly solvent now, and it is ouly tee want of gold in England that can ever shake them. Sometime before the Indian famine some one prophesied that it was coming, and. urged upon the authorities to take precautionary measures against it. His predictions passed unheeded but the famine came. I shall not presume to advise the Banks, hut I shall say this: that if they borrow money in England to pay for imports, their doom is sealed. J. M. Twomei.