MONEY AND BUSINESS AFFAIRS

Manawatu Standard, Volume LVI, Issue 109, 8 April 1936, Page 8

MONEY AND BUSINESS AFFAIRS

the banking bill, (By H.J.K-) Serious minded people will see m the Reserve Bank Amendment Bill considerable danger unless it is administered with extreme eautioi). 1 e chief features are the poweis of tiie bank in lending to the Government are greatly widened. For example the bank may advance on Treasuiy bills to the full amount of the anticipated revenue, that is, about £25,000,000, its power to purchase Government securities is extended, ami it must underwrite Government loans presumably in London as well as in the Dominion, and it must grant overdrafts to the concerns dealing officially with the produce, such, for example, the Dairy Industry Account. WILL OF PARLIAMENT. The bank comes directly under the control of Parliament through the Minister of Finance, and must carry out the will of Parliament within the framework of the measure. Full control of London funds is given to the bank which may, at its discretion, refuse credit to anyone under certain circumstances. Thus the bank becomes fully nationalised or socialised and the Government is certain of obtaining all the currency and credit it requires for implementing its elaborate socialist policy. MULBERRY BUSH MONEY. It is not clear whether the Government is to treat, the advances and other credits it receives from the bank as Joans to be repaid. Although not clear, it seems, from the speeches of Ministers, that the money is to be made available to the Government on request. It becomes what was described during the election campaign as the Credit Authority to provide a money service to carry out the will of Parliament. In his speech on the second reading of the Bill, the Prime Minister said: —“The Government had a definite mandate, and its mission was to make the lives of the people worth living. The country had wealth in abundance. The Government said it should be the basis of the monetary system.” In pre-war days, the note issue of most countries was based on gold. It is still the rule with the United States, France, Switzerland and Holland. The note issue of the Bank of England is based as to £260,000,000 on Government securities and the balance on gold. That is, for every pound note issued beyond the fiduciary issue of £260,000,000, there must be the equivalent in gold in the vaults of the bank. And the gold is taken, not at the market value of £7 per ounce, but at the statutory price of £4 4s lid per ounce. In the return issued last week the gold holding was shown at £200,800,000. There will be no coverage for the notes issued by the Reserve Bank, whatever the additional amount may be, beyond the amount of the sterling exchange and the small sum of gold. Just what the demands of the Government may be cannot be known, but that it will involve several millions is certain, and these extra millions will be obtained from the mulberry' busli, or tlie printing press.

EXPERT CRITICISM WANTED. Up to the time of writing the writer lias not seen any criticisms beyond that of politicians and the Press, neither of which can be taken very • seriously, it would be both interesting and useful to have the views of economists, experienced bankers and leading business men who have some knowledge of the subject. The views of London financial papers would also be useful. There seems to. be a disinclination to offer much comment, many believing that the more rope that is allowed the Government the sooner will the end come. But this is not fair to the people as a whole, who do not know much about the intricacies of the monetary and banking systems. It would be idle to take for granted that the Government’s banking scheme' will work smoothly from the start. On paper, and at first glance many will no doubt regard the measure as nearly perfect, but the test will come when the system is put into practical service. We have yet to see how the business community and the people react, and what will bo the nature of the repercussions ' * abroad. EXIT THE SHAREHOLDERS. The shareholders of tlie Reserve Bank are to be bought out, and the price mentioned in the Bill, namely, £6 os per share, is quite a fair one. The shares are £5 each fully paid up. They went to a premium immediately after allotment and some investors paid as much as £6 12s 6d, looking upon the shares as gilt-edged. Such investors will, of course, lose money. The shares will cost the Government, at the price fixed, £625,000, and as most of tlie money will be reinvested in Stock Exchange securities, stock brokers should have a busy time. New Zealand industrial shares' will be passed by for, Australian industrial shares, for the former may come under political domination and control. CUSTOMS REVENUE. Tlie Customs, revenue for the past financial year slioued a substantial increase, and the credit of it is due to the late lamented National Government. This increase was inevitable, because imports increased. From 1931 to 1933, imports were contracting. The world-wide depression reached its worst in 1932, when imports into New Zealand dropped markedly, and the imports were of a lower class of commodities. There should have been a failimprovement in 1933, but for the shock of the high exchange. However, the effects of that passed away as the v necessary adjustments were made, and then imports began to show an upward trend. Early last year it became quite obvious that the wool season would be a profitable one, and that induced importers to enlarge their indents. Importers regulate their purchases according to the state of domestic trade and economic conditions. So long as they feel assured that they will be able to resell at a profit the goods they purchase abroad, they will go on purchasing and importing. It is commercial confidence, not political confidence, that influences them. IMPORT PROSPECTS. The monetary policy of the Government, which has for its objective getting more money into the pockets of the people, is sure to cause imports to increase, and probably, there will be a good sprinkling of luxury goods in tlie imports. With the increase in circulation, higher salaries and wages and shorter hours, retail prices are bound to advance, and that may ultimately have an adverse influence on imports. If the cost of living rises relatively to the increase in wages the purchasing power would lie no 'greater than it is at present. There sire quite a number of possible reactions to follow the drastic .set novel monetarv and economic policy of the Government, that the most farseefrig economist would be unable to schedule them We must all have the experience n , u i experience i& the best teacher ’