FINANCE and COMMERCE

Dominion, Volume 24, Issue 77, 24 December 1930, Page 14

FINANCE and COMMERCE

STOCKS AND SHARES Wellington Exchange FOUR SALES RECORDED four sales were recorded during the day. qtnck Exchanges throughout the Dominion have now closed for the Christmas 2nd New Year holidays, and they will not reopen tor business until the morning of Monday, January 12.

DEALINGS ON ’CHANGE ■j Sales in the Dominion •I ' The following sales were recorded on ■ tho Stock Exchanges of the Dominion ■i; yoBter d f ‘y ■— WKLHNGTO n.

AUSTRALIAN LOANS Sales on Wall Street (Rec. December 23, 5.5 p.m.) New York, December 22. Sales of Australian loans on Wall Street to-day compare with those of a week ago as follow:— Dee. 15. Dee. 22. Commonwealth— Doi. Doi. 5 p.c, Jan.-July, 1955 .... 73 75 5 p.c, March-Sept, 1957 .. 731 74 4J p.c, May-Nov, 1956 .... 68i 69J New South Wales—--6 p.c, April-Oct, 1957 ..... 67} 67 5 p.c, April-Oct, 1958 .... 671 66 Queensland—--6 p. 0.; Feb.-Aug, 1947 .... 81} 78 7 p-o, April-Oct, 1942 .... 92 90} BASE METALS MARKET London, December 22. Metal Exchange quotations are as follow, those previously cabled being given for the purposes of comparison:— Dec. 18. Dec. 22.

CROPS IN THE SOUTH By Telegraph—Press Association. Christchurch, December 23. In the Canterbury markets a considerable amount of Interest is being taken in the •forecastings of the crop for the new Beason. Field prospects have been Increased during the past fortnight by favourable growing weather. There Is some speculation as to the area gown in onions. The price of £4 a ton on trucks has been nafd. Although there is an Indication that the wheat crop will be later than was the case this year, the crop Is reported to be looking well at present, and the yield may be better than was at first anticipated. Bran and pollard prices have been reduced still further, and have now reached .a lower level than has been the case since Just before the war. Quotations to-day are £5/10/- local and £4/10/shipping for bran, and £5/10/- a ton local and £4/5/- a ton shipping for pollard, f.0.b., values in each case. The reason for the decline has been the necessity for falling In line with Australian values. MARKET FOR WHEAT (Bee. December 23, 5.5 p.m.) London, December 22. Wheat cargoes are lower, with parcels neglected from 3d. to 6d. down. Futures: London, December 19/11 per quarter, February 20/2; Liverpool, December 4/2 per cental/March 4/3}, May 4/5, July 4/6. Chicago, December 22. Wheat.—December 76 7-8 cents, March 79 5-8 cents, May 81 5-8 cents, July 01 7-8 cents. . AUCTION SALES TO-DAY. Princess St., Dunedin, 12 Noom—-Sale a/c Mortgagee Empire Theatre (Alex Harris, Ltd.) Jl2 and 14 Manners St., 10.30 a.m.—Sale unredeemed pledges (Doherty Auctioneering Co.) 8 Willeston St,, 10.30 a.nv—Salo toys (M Johnstoa A Ca.)

HOW INFLATION BEGINS Public Finance Its Origin DANGERS IN AUSTRALIA Inflation, and how it begins, is dealt with by. Professor D. B. Copland, dean of the faculty of commerce at Melbourne University, In an article published by the Bank of New South Wales in its periodical circular. It is pointed out that European countries that inflated their currency did not escape the necessity of ultimately balancing their budgets. Recent discussions on the issue of credit or of banknotes as a cause of inflation have diverted public attention from a much more serious aspect of the present situation, states the article. In the .experience of all countries that pursued a policy of inflation after the war, the process of increasing the note issue and expanding credit had its origins in the exigencies of public finance. In some cases, notes were issued to meet budget deficits. This is the crudest form of inflation, but there are other means of meeting Government deficits that are equally inflationist. Governments may secure increased overdrafts at the ordinary banks or at the central banks, or they may issue Treasury bins to meet their deficits. In either way there is an expansion of credit which may be followed by an Increase in the note issue for the purpose of maintaining the cash reserve at the banks. In normal times, all governments are indebted to the money market through overdrafts at the banks or through the issue of Treasury bills. This, however, is a temporary Indebtedness ip lean periods which, in the normal course of events, is met from the proceeds of taxes or other revenues. No inflation can follow such a practice, because the indebtedness is created against the anticipated proceeds of revenue and these are ultimately realised. Where, however, the temporary advances to the governments are not met in this way, there is a permanent increase of credit whether additional notes are issued or not. The essence of inflation is such a permanent increase in credit to liquidate which there are no resources. Whether this increase in credit takes place in public finance or in private finance, the effect is the same. The community has obtained an Increase in spending power, but the production of goods and services is not increased in proportion. In these circumstances a rise in prices is inevitable. Process after the War. Mr. R. G. Hawtrey, of the British Treasury, and a world-renowned authority on currency and banking, describing the process of inflation during the war. states in an article in the “Encyclopaedia Britannica” “Essentially what happened was that the belligerent governments found their liabilities outstripping the funds they could raise by taxation and by the borrowing of genuine investible savings. After exhausting every expedient, they were faced with the imperative necessity of payment, and rather than let their current liabilities, get indefinitely into arrear, they practically printed paper money for the purpose of paying. In form the governments ‘borrowed’ from the central banks of issue, and the central banks placed at their disposal, in the first Instance, not actual legal tender notes, but a credit on current account. In Continental countries the credit would be quickly drawn out in notes. In England, where cheques were more freely used, this would not necessarily be so, but deposits at' the Bank of England count as cash to the money market and the banks in practically the same way as notes. Credit expanded in proportion, and when notes were required they were issued. As the quantity of money in each of the belligerent countries grew, the value of its currency unit fell; in other words, prices rose. The foreign exchanges likewise became adThe present position of Government finance in Australia involves, real dangers of this nature. The country has lost a considerable percentage of its national income. Though some economies have been made in public expenditure, they are by no means sufficient in the circumstances. This is particularly true of Commonwealth expenditure. If expenditure is maintained at present levels, one of two courses must follow. Public Expenditure. First, taxation may be increased to meet the deficit. This course involves a considerable transfer of funds from taxpayers to the Government. Private expenditure is reduced accordingly, and there is less Income available to support the existing amount of credit that has been extended to private business. Business men and producers generally find themselves unable to meet interest on their borrowings. If this business credit were reduced accordingly, there would be no fear of inflation, because the Government would have balanced its budget, and the spending power of the people as a whole would have been reduced to an amount consisten with the Income available after taxes had been paid. But this course involves very heavy taxation, and a considerable reduction of bank advances tor all productive purposes. The economic effects would be serious. Heavy taxation would greatly burden industry, and a forced reduction of private credit would be Involved. , , . The second course is the maintenance of a high level of public expenditure without the revenue to meet it. It is obvious that this condition of affairs can .be sustained only by the issue of credit to Governments to meet their commitments. In a crisis where the fall in the national income has so seriously depleted Government revenue, it is always necessary to issue credit to the Government, pending the completion of the readjustments in Government expenditure and revenue. But this action can be confidently entered upon only when it' is obvious that the process of. readjustment is being vigorously pursued and will be completed in a reasonable time. If this is not so. Governments become heavily indebted to the banks or to the money market through the issue of Treasury bills, and the credit so created is not accompanied by a proportionate increase in' production and income. Such a condition of affairs is inflation, whether the note issue has been expanded or not. If it continues long, the note issue must be expanded in order to maintain the cash reserves of the banks. It was in this way that inflation commenced in most European countries after the war. though no responsible treasurer or governor of a central bank would admit that notes were being issued in excess of the demand for them. This, of course, was true, but the increased demand for the notes was in itself the result of the inflation of credit caused by the increased indebtedness of governments, and the issue of notes only served to sustain this inflation and to provide a basis for further inflation. Australia must not overlook this object lesson. Inflation may be commenced in an insidious and obscure way, while we are wrangling over the proposals made by avowed inflationists who would increase credit and the note issue in the most extreme and obvious way. . _ , No Danger Ahead.

The published returns of revenue and expenditure for the Australian Governments as a- whole show large deficits which are not being met from taxation, or other revenue. These deficits can only be met by borrowing in one form or other. As this borrowing is required to meet current expenditure that should be met from revenue, there is an Increase in credit without a corresponding increase In production. . If this borrowing continues at its present rate, we shall drift into inflation in the same wav as many European countries did after the war. An attempt to maintain, public expenditure at Its present level Involves this danger. Expenditure must be reduced. The whole gap between expenditure and revenue cannot be bridged by economies. Still less can it be bridged by taxation. A drastic reduction in expenditure is a first condition of balancing budgets within a reasonable time, and therefore of avoiding the inflation into which we are drifting. The responsibility for taking this step rests mainly with the Commonwealth Government, which up to the present has not followed the example of the States in making economies, much less given a lead to them. Those who advocate an expansion of credit to maintain a scale of public expenditure that the community cannot afford are walking on dangerous ground. They have the example of many European countries before them, and what happened there should cause the most confirmed inflationist to pause before committing the country to a disastrous experiment. It is quite forgotten that European countries that inflated their currencies did not escape the necessity ultimately of balancing their budgets. Inflation caused great social and financial disturbance, upset the basis of all monetary contracts, and lowered the standard of living of many classes. The reconstruction of public and private finance was in the end attained by much greater sacrifices than would have been necessary at the outset. By pursuing a bold policy of economy Australia can now reconstruct her finances with the smaller Initial sacrifice The longer she delays the more difficult will be the task of reconstruction and the greater the sacrifices Involved. BRADFORD TRADE FIRM Bradford, December 22. The holiday market in firm at a lower .bosU,

LIVE STOCK MARKET

Addington Quotations SMALL STORE SHEEP ENTRY By Telegraph—Press Association. Christchurch, December 23. The weekly metropolitan market at Addington to-day was an unusual one, Inasmuch as it came so close to the Christmas vacation. There will not be another market until January 7, and yesterday's auction was termed a “double” market. It was that in name only, as in none of the departments was the ejitry heavy, and in a number of' Instances the entry was lower than usual. The entry of store sheep was the smallest for many months, and the sale was a ready one with a fair attendance of buyers. Values were very firm, and compared more than favourably in many Instances with those ruling at recent sales. Values were: Good six and eight-tooth Romney wethers to 14/-; good Romney wethers lambs, to 12/1; good ewes and lambs, to 13/4; ordinary ewes and lambs, to 7/4; good four and sixtooth Romney ewes, to 14/-. The entry of fat lambs was 950 head, as compared with 2200 head at the “double” lamb market last week. The sale was not a ready one, and values were easier by 1/- a head. The average price per pound was 6}d, and that prevented export buyers from operating. Values were: Extra prime lambs, to 20/7; prime lambs, 20/6 to 23/-; medium lambs, 18/6 to 20/-; light lambs, 15/6 to 18/-. The entry of fat sheep was much shorter than at last sale. The sale was steady at prices on a par with those of last week. At one stage near the end of the sale ewes sold at rates a little above those ruling last week. Values were: Extra prime wethres, to 25/10; prime heavy wethers, 22/- to 23/9; medium-weight prime wethers, 19/- to 21/6; second quality wethers, 14/6 to 18/-; light wethers, 12/- to 14/-; extra prime ewes, to 20/10; prime ewes, 17/- to 19/-; medium ewes, 15/- to 16/6; light ewes, 11/6 to 14/-; aged and, inferior ewes, 9/- to 11/-. There was an entry of 219 head of fat cattle—the smallest for the year. The quality was very mixed, but included a sprinkling of “baby” beef and prime handy-weight sorts. The sale was very erratic, varying from being on a par with late rates to £1 a head advance. It was very dull at the close. No graziers outside the province were represented. The best medium weight beef made from 39/to 43/- per 1001 b., and in the case of some of the baby beef a little above that figure. Heavy beef brought from 32/- to 36/-; cow beef from 29/- to 34/-; secondary beef, 24/6 to 28/-; and rough down to 21/-. Values were: Extra prime heavy steers to £l9/7/6; prime heavy steers, £ls to £l7/10/-; prime medium weight steers, £ll/10/- to £l4/10/-; medium quality steers, £B/10/- to £11; light steers to £8 5/-; extra prime heifers t» £l4/12/6; prime heifers, £lO to £l2; medium heifers, £7/10/- to £9/10/-; light heifers, £o 10/- to £7; extra prime cows to £lo/7/6; prime cows, £9/10/- to £ll/10/-; medium cows, £6/15/- to £9; light and aged cows, £5 to £6/10/-. „ , , The entry of vealers was small and tue quality mixed. There was not a great demand from the butchers, but last week s prices held. The top price was £5/6/-. There was a small yarding of store cattle with few straight lines. The sale was a dragging one with very little: demand. A pen of good two-year-old Shorthorn steers brought £7/15/- and a pen of 15-months Hereford steers made S®/ 5 /-. Mixed sex yearlings brought up to 51/- and a pen of good coloured yearling heifers sold at £3/15/-. Pottiqg bulls made up to £ Thereat tie entry of dairy cattle totalled 36 head compared with 50 head last week. Although the quality was high there was little demand for any class, and the majority of the yarding was passed. Values were: Good second and third culvers, £9 to £10; medium cows, £6 to £8; aged and inferior, £2/10/- to £5; good heifers, £8 to £9; medium heifers, £6 to £7, in Wconers entered in the fat pig pens, and choppers were also scarce. There was a medium entry of porkers, including some fromthe West Coast. Prices were in X paid last week. Values were: Porkers, 36/ to 45/-; heavy porkers, 47/6 to 56/6; average price a lb, 63d. to 7}d.; choppers, £3 13 The <> entr / J /G of store pigs was a short one, comprising To head only. The Hsia was steady throughout, and there was no change “ y the basis of values which ruled at last market to record. Values were : Large stores to 35/-; medium stores., BURNSIDE PRICES IMPROVE Poor Yarding of Stock By Telegraph—Press Association. Dunedin, December 23. There was a poor yarding of stock at the Burnside sales to-day, and in all sections prices showed an advance on last week’s rates. The number of fat lambs yarded (952) was sufficient to meet the demand of the trade, and they sold at 2/6 to 3/- more per head than at the previous sale. Good lambs realised from 22/6 to 25/-, and poorer sorts sold at 13/- to 18/-. The yarding of fat sheepu was probably one of the poorest ever offered at Bumside, but prices improved on last week’s rates, and the best of the muster sold at an advance of 2/- to 4/- on late rates for wethers and about 2/6 more for ewes. Up to 30/3 was paid for medium light wethers (shorn). Light weights and plain quality realised 23/- to 26/-, equal to sd. per lb. Old ewes brought up to 18/6 for heavies and from 11/- to 14/- for light weights. There was not one pen of extra prime beasts in the yarding of fat cattle, which was a poor one. It consisted principally of local light-weight bullocks and rough cows. There were few butchers present, but the yarding was disposed of at approximately last week’s rates. From £l6 to £lB 10/- was ralised for medium weights and £ll to £l2 for light inferior bullocks. Cows brought from £8 to £l2. The price for ox beef worked out to 43/- per 1001 b., and that for heifers was 35/- and for cows 22/6 to 25/-. There were only four pens of fat pigs on offer, and these sold at rates equal to those of last week. Only about a dozen medium cows were yarded in the store cattle section, and these sold at prices equivalent to last week’s rates. Values at Waipukurau Dominion Special Service. Waipukurau, December 28. There was a better quality yarding of cattle at the weekly Waipukurau stock sale to-day, and a greater variety in small lots than has marked recent sales. Prices realised were consistent with recent low values. Not more than one line of fat sheep was sold. Store sheep fetched satisfactory prices having regard to the existing conditions. Prices were: — Fat Cattle. —Four unfinished P.A. cows, £5/5/-; small light prime Shorthorn heifers, £6/8/-; four light Jersey cross bullocks, £6/8/-; four small Shorthorn heifers, £3/12/-; three light prime P.A. Hereford ditto. £5/18/6; four light prime P.A. cows, £5/1/-: three prime ditto, £6 < 3/-; unfinished Hereford steer, £4/5/-; i ditto, Jersey, £3/15/-; four light prime ■ Shorthorn ditto, £4/5/-; unfinished Jersey J

ditto, £2/1/-; prime K.P. heifer, passed, £6/5/-; Shorthorn cross cows, ditto, £o. Store Cattle—Four young P-A. and Shorthorn steers, £3; Jersey cross steer, £3/2/-; small P.A. ditto, £3/12/-, small P.A. heifer, £l/17/6; four Jersey cross heifers, good condition, £3/10/-. Butterfat stock ranged from £l/17/6 to £2/15/?. Sound Jersey cow, in profit, was P F S at d Wade-shorn ewes, 7/9; other lines passed as follow. 36 ewes, 8/-; 30 hoggets, 12/-, 17 wethers, 14 Store Sheep.—One hundred and twentyfour two-tooth ewes, good fettle, from Tikokino, 15/-; 176 wether lambs, good line, 7/8 • 19 woolly ewes and 19 lambs, mostly weli-develoned, 15/10; 18 small m.s. lambs, °/10* 145 ewe lambs, fair quality, passed, 6/4. ’ Weekly Sale at Masterton Dominion Special Service Masterton, December 23. Owing to the holidays, the New Zealand Farmer! Co-op. Distributing Company held their usual weekly Masterton stock sale today, instead of Wednesday. They offered a fair yarding of sheep to a small attendance. Bidding was not very keen but they were successful in disposing of the whole yardin’ with the exception of one pen, at the following prices :—145 smdll 2-tooth wethers, 9/7; 25 do., 7/10; 77 do 0/- (pass ed) • 8 good woolly ewes with 5 lambs (all counted), 12/7; 7 fat woolly ewes 10/-; 19 fat b.f. Downs, 14/1; fat lambs, from 16/to 18/-.

Buying and selling c Wrday’s final call on the Exchange were as folioN.Z. GOVT. LOANS— 61 p.c. Inso. Stk., 1941 4 p.c. Bonds, 1939 ant luotations at yes- * Wellington Stock w: — Buyers. £ s. d. 95 12 6 Sellers. £ s. d. / 1 97 0 0 DEBENTURES— Wellington Gas Co. . 99 Well. Racing Club .. 103 Well. Amal. Brick ... 0 0 0 0 100 0 0 N.Z. Breweries (bonds) 1 1 0 —- Ditto (stoci) 1 .0 9 .BANKS— ' Australasia 9 2 e Aust, of Commerce .. Commercial of Aust. — National of N.Z. New South Wales ... 0 15 ♦5 5 28 J! 0 6 New Zealand — , FINANCIAL— ' Goldsbrough Mort. ... 0 N.Z. Guarantee Corp. (ord.) 0 6 6 0 7 0 GAS— Auckland 1 3 4 Christchurch — 1 5 0 11 1 8 Gisborne Wellington (ord.) .... Ditto (pref.) *0 16 0 6 insurance— 0 14 National 1 New Zealand 2 1 0 MEAT PRESERVING— 8 0 tl 10 0 N.Z. Refrigerat. (10/-) 0 1 2 0 1 TRANSPORT— , , x Huddart, Parker (ord.) 1 6 9 Ditto (pref.) 0 19 7 TIMBER— National — 0 9 BREWERIES— New Zealand —• 1 19 0 Staples and Co —— 1 18 0 miscellaneous— _ , ♦1 10 British Tobacco (ord.) 1 9 9 Dental and Medical . — 0 12 0 Dominion Investments 1 1 6 Electro. Zinc (pref.) . —- 0 17 6 Farmers’ Auction. (“B” 0 18 pref.) —— Howard Smith (ord.) 0 7 3 Newton King (pref.) — 0 12 6 National Electric .... to 9 0 — Wairarapa Farmers (pref.) — 0 12 9 OIL— Taranaki 0 3 0 — Mount Lyell to 17 8 Walhl o ♦Cum. dividend. tEx 111 — : dividend.

Sales reported £ s. d. Bank of New Zealand 2 10 0 National Bank of Australasia ... 5 5 0 Lower Hutt Borough, 5 p.c., 1949 89 17 0 British Tobacco (ord.), cum. div. 1 10 0 AUCKLAND. £ s. d. Commercial Bank of Australia 0 15 8 Bank of New South Wales (A) 28 0 0 Renown Collieries ..... 0 7 6 0 15 6 0 3 1 2 0 0 CHRISTCHURCH. £ 8. d. N.Z. Refrig. (10/- paid) ........ 0 1 3 Tooth’s Brewery ........... 1 2 3 Mahakipawa Goldfields (2) .«•«« : 0 0 8

Copper— £ s. d. & 3. d. Standard, spot ... 45 3 9 47 5 0 Standard, forward 45 1 ,3 46 18 9 Electrolytic .... 47 12 6 49 0 • 0 to 48 0 0 50 0 0 Wire bars 48 0 0 50 0 0 Lead— Spot 14 6 3 15 0 0 Forward ....... 14 6 3 15 0 0 Spelter— Spot 13 10 0 13 15 7i Forward ....... 14 0 0 14 3 9 Tin— Spot ............ a 114 3 9 Forward 115 12 0 Silver— Standard, per ok. . 14Jd. 151-lfld. Fine, per os 1511-lGd. IGjd.