The Press SATURDAY, NOVEMBER 5, 1960. Credit Squeeze Tightened

Press, Volume XCIX, Issue 29354, 5 November 1960, Page 12

The Press SATURDAY, NOVEMBER 5, 1960. Credit Squeeze Tightened

Mr Nordmeyer’s tightening of the credit squeeze seems to have been carefully timed. For the next few weeks only banks and traders will feel the effects, which will not filter down through the community until after the General Election. It is time something was done to damp down the inflationary pressure that has been building up. Danger signals have been seen in the threat to our overseas balances and the substantial increase in trading bank advances. The credit squeeze will help to prevent greater instability; but its usefulness is impaired at this time by the inflationary policy of the Government. A reduction in the scale of State spending would be more effective and would obviate the need for artificial bank restrictions. The commercial community has some reason to complain that on the one hand it is expected to serve an expanding demand and on

the other it is hampered by a lack of credit. This attempt of the Government to move simultaneously in opposite directions illustrates the futility of expecting central banking techniques to protect the economy from the consequences of unwise political policies. The credit squeeze also shows how unsubstantial was the 1957 Labour proposal to appropriate the banks’ profit on the issue of credit. By forcing the banks to borrow heavily at a high interest rate from the Reserve Bank the Government has always been able to limit or extinguish, as it chose, any return from banking. Possibly Mr Nordmeyer saw in his alteration in reserve ratios the additional advantage of demonstrating to the socalled monetary reformers among socialists that the Government really had no need to fulfil or repeat that particular item of the 1957 policy.