ECONOMIC SITUATION

Evening Post, Issue 52, 2 March 1935, Page 16

ECONOMIC SITUATION

A BANKER'S REVIEW

PROFITS FALLACY

(From "The Post's" Representative.) LONDON, January 26.

Mr. Favill Tuke, who is the new chairman of Barclay's Bank, made his maiden speech at the annual meeting, j He spoke with the authoritative advantage of one who had had over fifty years' experience with banking. He referred to the fallacy' that in tad as well as in good times the banks are able to enjoy equally satisfactory results. The appearance >of relatively stable earnings, he said, was simply the outcome of conservative management. The banks purposely avoided increasing their dividends during the war and post-war periods, when very large profits were earned, because they felt it was wiser ■to regard these profits as exceptional. Thanks to this conservatism, the banks had been able to avoid decreasing dividends in periods of depression. By reserving profits also, Mr. Tuke explained, the banks had been able to render their services more cheaply than otherwise would have been possible. At the same time the possession of large reserves had enabled the banks to "nurse" customers who were in difficulties instead of forcing them into liquidation. UPHILL PROGRESS. -' As to economic conditions, he said: '"There has undoubtedly been an improvement in economic conditions in many, directions during the past two years, and certain of the factors, which ■were responsible for the depression are being gradually eliminated. Much of the revival that has taken place has been in internal, as opposed to external, business, and in certain countries conditions remain very difficult. Nevertheless, the reduction in the quantum of world'trade has been definitely checked,.the rise in industrial production has been partly responsible for a decline in the stocks of certain raw materials, the fall in wholesale prices has been' arrested in many countries, and there has been some improvement in • the purchasing power of primary commodities 'in terms of manufactured goods. Moreover, the trend of events in the capital markets in a number of countries indicates a return of confidence among investors. "All these developments suggest that the world is gradually emerging from the depression, but it would be unwise; to ignore the fact that much has yet-to be done before we can hope to return to the level of prosperity which the progress of science and invention has made possible. The socalled 'gold bloc* countries may have to decide between devaluation and further deflation, and if finally they are compelled to choose the latter couroe, we know from our own painful experience that many economic and political problems have to be overcome before an equitable equilibrium between prices, and wages can be attained. - . l NO STABILISATION YET. "We must have a stable blsis for international trade before its volume can be substantially 'increased, and the gold standard is, in my view, the only practicable basis,-because, apart from other reasons, it is the only one in which the people of the world appear to have confidence. I feel; however, that it would be a mistake of the first magnitude for.this country to return to gold until some at least of the difficulties I have mentioned have been adjusted, and until there is a Reasonable probability that the system will be allowed to function normally so that it can fulfil its essential purtoose of maintaining equilibrium between the price levels of the various countries of the world." . , ■