INVESTMENT SECURITIES.

Manawatu Standard, Volume L, Issue 253, 20 September 1930, Page 5

INVESTMENT SECURITIES.

THE FINANCIAL CRISIS. SOME CONSOLING FEATURES. Discussing investment securities, an interesting survey of financial conditions has been made by Mr H. G. Bagnall for the annual report of the Palmerston North' Chamber of Commerce. He states: “The local Stock Exchange quotations for shares in keeping with all the stock exchanges of the world have, with occasional minor movements upwards, shown an unremitting tendency downwards, the stacks of companies whose main interests lie in Australia suffering most. There is no- denying the fact tliat our interests are largely involved with those of the Australian Continent and will always continue, to do so. Apart from the fact that the Australian hanks operate here, our own Bank of New Zealand has interests in Australia, and inany insurance and pastoral companies operating here are largely interested in Australian finance and business properity or depression. That being so, some reference to the present condition of affairs on the other side may not he out of place. “The difficulties which 'jare due largely to the high cost of production have been so thoroughly dealt with in the Press in connection with the vi#it of Sir Otto Niemeyer, that it is hardly necessary to make more than a passing reference to them. It is perfectly obvious, though, that Sir Otto emphasised in the strongest terms that the way of salvation leads not in the direction of higher taxation, which in itself spells higher costs of production, but in the thorough overhaul of public expenditure and the initiation of a new area of economy and the elimination of the wasteful methods of tho past. ■ A PREVIOUS CRISIS. “The last great Australian financial crisis occurred in 1893. This was primarily caused by an unjustifiable land boom and resulted in every Australian hank except three closing its doors. The three exceptions were the Bank of New South Wales, the Union Bank, and the Bank of Australasia.

“The consoling feature of ’the present position is that: (1) This crisis is not likely to reach the dimensions of that in 1893. (2) Even if this crisis did approximate that of 1893 the individual strength of the banks, pastoral and public companies, generally, is so incomparably greater that no national disaster equal to 1893 is possible. To take one instance, the Bank of New South Wales’s capital and reserves in 1893 were £2,375,049, public liabilities £21,729,118,’in other words the public had a margin of 10.9 per cent security represented by the funds supplied by the shareholders of ures of 1893 with those of 1929, this, bank liad capital and reserves £14,U 00,978, public liabilities £73,920,142, or a margin of 18.9 per cent-.. The Commercial Bank now shows capital; and reserves £6,473,801 and' public liabilities £24,572,863, providing a margin of 26 per cent. FINANCIAL STRENGTH. .

“These figures disclose an enortnously added strength compared with the figures of. irine of the three banks which successfully .faced the 1893 crisis. - The position is even sounder than' disclosed by the. above figures.. ,It is well-known that: the banks and i public companies have since 1893 adopted 1 the method of accumulating- secret-ire-servos to ensure that in terms of stress no recourse .will be made on thfc published reserve funds. These 1 accretions of. financial strength are typical ones of the relative financial position of Australian public crimpany f-inirice then and now. The whole is made upof its parts 1 and the. realisation -of the fact that, notwithstanding the parlous conditions of Australian Gdvernment finance to-day, the individual and company finance being practically - impregnable makes for a certainty that sooner’or later the Australian.- position, will right itself.” ' ' '