The Gisborne Times. PUBLISHED EVERY MORNING SATURDAY, DECEMBER 19, 1908. THE FINANCIAL OUTLOOK.

Gisborne Times, Volume XXVI, Issue 2378, 19 December 1908, Page 4

The Gisborne Times. PUBLISHED EVERY MORNING SATURDAY, DECEMBER 19, 1908. THE FINANCIAL OUTLOOK.

The facts which we publish in another column represent the views of •various sections of the community, from retail tradesmen to bank managers, upon the present business situation and its prospects. Naturally they cover a wide range of ideas as to the issues, for scarcely two persons will give precisely the same opinion as to the causes of the present position. Upon one point, however, all seem to be agreed, namely, that the financial depression which has • been talked about for some months has been very acute and that the time of relief is not yet. In Gisborne the pinch lias fortunately not been felt as much as it has in some parts of the Dominion, and the reports from the tradespeople and wholesale houses must be considered exceedingly satisfactory. Bankruptcies have continued commeiulably scarce, and there are other evidences that so far Gisborne is weathering the storm oi financial depression exceedingly well. At the same time there is no gainsaying the fact that the tightness of money has had a paralysing effect upon business enterprises, and the expansion of the district has been checked in consequence. Moreover, tradespeople have of late been finding it more difficult than usual to get money in, and this necessarily acts as a restriction to trade. Of those who have expressed an opinion upon the situation some are hopeful that an improvement is imminent, whilst others can gee no such prospect, at any rate for several months to come. Personally- we must range ourselves with those holding the latter view. The tightness in .the money market lias been caused chiefly by the shrinkage in the value of our exports and the depression in the Old World, and can only be remedied either by the slower process of more economical working of the land or by the swifter method of increased prices. Had wool remained at last year’s values it would have still paid farmers to rear sheep, hut the difference between the boom prices and the lower ones,roughly several million pounds, would have been lost to the Dominion. Every farm in the Dominion would have had to bear its share of the loss, and until the farmer- by economical management made up the loss sustained and so arranged his finances as to be able to accept a return on a lower valuation of his land, his former prosperity could not bo restored. However, fortune has once more been good to our settlers. The price of wool has again risen, whilst the exceptionally favorable weather conditions throughout the Dominion have given the farmers a record percentage of lambs and a particularly weighty and well conditioned wool clip. This will make the necessary readjustment of land values "much less marked than would otherwise have been the case at the same time that it will , greatly increase the monetary returns to the farmer as compared with last-year. This should an immediate effect in restoring any wavering confidence on the part of money lenders, but so far as increasing the quantity of money available concerned we do not see how an improvement can reasonably be looked for until the '(present, season’s wool clip and lambs have been sold and the returns secured. In the meantime is is certain that settlers will be compelled to exercise the utmost care in the management of their farms. Haphazard methods will not do, and it is satisfactory to hear that many of them are going in for rape sowing in order to make better provision for the fattening of lambs. In this and in other ways it is possible to secure a larger return from a given acreage that lias been obtained in the past, and this is really the only sound method of combatting the unwelcome fall in prices.

Wo are not surprised to learn that as a result of the tightness of money very little business has been passing in farm lands during the pa6t twelve months, and posfeibly this is ia good thing for the country. In tlie past there has-been far too much trafficking in land, and it has gone on to such an extent that farmers, instead of being cultivators of the soil and pastoralists, have in many cases been merely land speculators, taking up a property for a brief period in order to sell at a profit and then seek another. With land values rising all the time as the result of boom prices for raw products and the keen demand for land, it was easy for these land speculators to make the business lucrative, but it was a very bad thifig for the country. Values were constantly being pushed up and up, until* they reached an absurdly high level.. After a farm had changed hands three or four times in as many years, the last holder would be payinginterest on the original value plus the profits of all who had gone before. Whilst prices wore abnormally high lie could just manage this, but. when they dropped he dropped too. We

believe the outcome of what is a very unpleasant situation from the" Dominion point of -view will be to make for greater stability in national transactions and greater caution on the part of our farmers with a welcome decrease in land speculation. Some of those who have felt the pinch have been inclined to blame the banks, and it must be admitted that the man who seeks an overdraft and fails to get it is more likely to blame the bank than the gentlemen in England and America who refused to pay former prices for our wool, and so made it impossible for the bank to lend as much as before. After all, the banks are really trustees for the people as a whole. It is to their interests to do as much business as possible, provided that business is on a sound basis, but they cannot lend out when money is not coming in. In tlie boom times prices were so high that the average farm returned a big profit, and this in some form or another found its way into the bank’s coffers, and was immediately available for re-lending. Like everyone else the banks accepted : as a basis the then existing land values, and having plenty of funds coming in lent freely but with altered conditions a different policy became imperatively necessary. With the reduced production—that is as regards values—there was no surplus to the farmer which he could invest, whilst the banker in bis position as trustee for all who do business with him had to be the first to recognise the lessened value of the land, and when he did lend to adopt extraordinary precautions in regard to the security. However, despite this very necessary conservatism it is not any lack of confidence in the soundness of the security of the New Zealand farm lands which has been chiefly responsible for the banks refusing to lend money in many cases where it could reasonably be looked for, but tlie very excellent reason that they have not had the money to lend. Advances have been considerably higher than deposits throughout the year. One gentleman interviewed by our reporter blamed the Australian banks for taking money from New Zealand just when wo ivauted it, but the banking returns show that the three Australian houses doing business with this Dominion had advanced more than £2,000.000 in excess of deposits in New Zealand when the last quarterly returns were made up. As a matter of fact, the banks as a whole have certainly lent quite as much as eoukl.be expected consistently with cautious management, and this caution was imperative if tlie Dominion was to be spared a repetition of the disastrous position in 1893-1894. It is this same policy of caution which is now being learned by the Dominion as a whole, and it cannot be learned too well or too’ thoroughly.