FINANCIAL CRISIS IN AMERICA

Auckland Star, Volume XXXIX, Issue 78, 31 March 1908, Page 5

FINANCIAL CRISIS IN AMERICA

ITS CAUSES AND CONSEQUENCES.

The chair__an of the National Discount Co., Ltd., in a speech to shareholders at the "naif-yearly meeting, held in London on January 22 last, said: — "As far back as the autumn of 1906, it was evident that the extension of rail-1 ways and other industrial undertakings in the United States of America were being pushed far too rapidly to enable them to be financed without the aid of large sums of foreign capital, whilst the phenomenal rise in' the value of most of the leading commodities, especially metals, also tended to absorb capital all over the world. The better, feeling after the turn of the year, it is true, led some to think that the worst was yet to come, and there arose in the United States a condition of panic, causing a run on.the trust companies and banks, and hoarding of money, with the result that large sums in gold were ordered for shipment from England, causing a rise in the Bank of England rate to 51 per cent ou October 31, 6 per cent on November _, aid 7 per cent on November 7, whilst rates of discount on the Continent also advanced, and at one moment it was feared that the unfavourable financial position in Germany might lead to serious embarrassments there. For a time even the 7 per cent bank rab£ failed to stop the outflow of gold, and it was only after this rate had ruled for eight weeks that the bank directors saw their way to reduce it to 6 per cent on January _• and subsequently to 5 per cent on January 16. It is hoped that the lesson given may be taken to heart, and that it may serve to check the feverish desire exhibited during the last few years, to undertake enterprises which, however well considered, and however likely in the end to prove remunerative, outstripped the possibility of financing them within a limited time.

It is a curious fact that whilst the financial strain has been in many quarters attributed to over trading, it does not appear that there are anywhere excessive stocks of either raw materials or manufactures, and therefore the fall in values must be looked upon as rather due to the stringency in financial circles, coming at a time vt_._n high values required more capital to carry on the same amount of actual business, and caused buyers for the same reason to work as far as possible from hand to mouth, than to over-trading or over-pro-duction. Such a condition as we have passed through must, however, have forced economy oh many people in all classes, and have limited thereby the sale of all goods, the result . >__g that' the recovery from the commercial depression may not he so rapid as the restoration of the financial eqi_i__br-__n; but I believe that, though 'stow, it" i__U he