"HIGH FINANCE"

Evening Post, Volume CXXVI, Issue 80, 1 October 1938, Page 11

"HIGH FINANCE"

RESERVE BANK FUNDS

DISQUIETING DROP.

WHAT MR. NASH SHOULD DO

--."Instead of travelling about the country looking for votes for his party, the Hon. W. Nash should be back in

conferring with his Governor of the Reserve Bank and Departmental officers," said Mr. O. C. Mazengarb, National candidate for Wellington Suburbs, at Korokoro last 'evening.

--. •-'■ ■ Mr. -Mazengarb drew the attention of the meeting to the financial situation of the country which had been steadily developing while the thoughts of the people had been centred on the international crisis.

;._■:.-.-,-',The weekly statement of the Bank ; published yesterday reported "A fur- ' ther substantial decrease of £797,558 in sterling exchange, bringing the •total down to £11,449,447." In plain •terms, said Mr. Mazengarb, this meant that in one week over three-quarters ■ 'of a. million pounds of the reserve we held in London had disappeared. Altogether, about eight millions had .'vanished-in tlie past year. This was ; duo to two causes. Firstly, the heavy 'importation of goods which were coming 'into the country in severe competition with our own • industries; and, secondly, because people who were afraid of the future under a Socialist Government were sending their money ■abroad and investing in securities Which caused a drain on London funds. LOCAL INDEBTEDNESS. .While depleting our sterling assets the Government was at the same time rapidly increasing its own local indebtedness to the Bank. For some of that credit the Government haci • assets such' as the houses which had. been built under its plan. In respect pf:. other . items, there was no corresponding asset at all. . The deficit in the Dairy Industry Account,, for instance, ' was plain and unabashed in-;, flation of the currency.

. "The average man may find it difficult to follow the movements of this •high, finance,' but. he should be able to see this, that during the year we have consumed nearly eight, Trillions of sterling, assets and in addition have ■drawn on our local credit for about seven millions," said Mr, Mazengarb. But a better idea of the alarming situation which had developed could be taken from the way in which the ;Bank?s - "reserves against notes and Other demand liabilities" were going down. When the Government came ihto power the Reserve Bank notes lend other liabilities had a backing of assets equivalent to 99.16 per cent. That =-was;a strong position. But the Government had so drawn on its assets that-the proportion of reserve to detoand liabilities was today only 60.785. MINIMUM OF SAFETY.

/ The Statute under which the Bank Operated, said Mr. Mazengarb, pro-

yided. a minimum of safety

beyond

>. which it could not go. "Mr. Nash knows t what, that minimum, is and he should know that the Government's operations have already caused the Bank to go more than half-way towards the statutory danger level," Mr. Mazengarb

continued.'

At its present pace

might be only a_ few months before the . ininim.um reserve of backing was .-/reached./^'.What, was to happen then? A prudent Minister of Finance would certainly take some action now even although, it might cause his defeat at the polls. "But Mr. Nash is a Socialist, and his Parliamentary UnderSecretary (Mr. J. A. Lee) has shown ns in his new book that Socialists' are completely unconcerned about the - possibility of a break in our financial .structure," the speaker added. "If .-that should occur the people who will -suffer most, as they always do suffer in • every financial crisis, are the wage - earners. : Instead of following blindly •'they, should pause to see whither the ■ 'Labour leaders are taking them."