MONEY AND BUSINESS AFFAIRS

Manawatu Standard, Volume LVI, Issue 259, 30 September 1936, Page 2

MONEY AND BUSINESS AFFAIRS

BANKING RETURNS. (By 10. K.) The weekly return of the Reserve Bank to Monday, September 21, shows an appreciable decline in the amount of the London funds. The amount of these funds during each of the past four weeks shows as under:— 1936 £ Ang. 31 19,779,236 Sept. 7 18,847,195 Sept. 14 18,849,074 Sept. 21 16,921,502 Compared with August there is a decrease of £2,877,734, or an average of over £900,000 per week. Compared with the corresponding dnto in September last year there is a contraction of £3,066,440. The bank will recover most of this when the dairy produce, against which tl)£ bank has already advanced £894,230, is, sold in London. During the week ended September 21 the advances made on dairy produce totalled about £184,000, and this should increase weekly until about March or April. TRADING BANKS. The return of the trading banks for the month of August shows a small decrease in free deposits, and a larger decrease in the fixed deposits as compared with July and June. The figures for the three months compare as under:— Free Fixed 1936 £ £ June 30,805,731 36,066,713 July 30,268,298 35,613,794 August ... 29,906,883 34,893,116 In August last year the free deposits totalled £24.778,818, and the fixed deposits £36,382,220, so that the free deposits are substantially larger than last year but the fixed deposits, on the other hand, are substantially lower. The advances in August were a little over £600,000 greater than in July, but nearly £BOO,OOO more than in June, the figures being as under:— 1936 £ June 45,077,019 July 45,184.964 August 45.825,860 The advances in August last year totalled £46,339,960. Thus while the aggregate deposits are larger than last year, the advances are less. The note circulation at the end of August totalled £7,791,289, against £7,170,571 in July, and £7.221,938 in June. The only other item in the returns that needs to be quoted is the London funds. The figures for each of the three months are as under: 1936 £ June 17,316,659 July 16,729,219 August 14,437,895 There is a substantial decrease in August as compared with the two preceding months, and. as there has been a big shrinkage in the London funds of the Reserve Bank it is obvious that there is a tendency to increase the imports. The trade returns show that the imports in August amounted to £27,388,000, against £23,287,000 in August last year, and £19,856,000 in 1934. EUROPEAN FINANCE. France lias again become the centre of a financial sensation having its origin with tlie heavy withdrawal of gola which is ueing hoarded pending developments. For a long tune past the opinion has been .held by many financial experts that devaluation in France was inescapable, but the Government has hesitated to admit this. Devaluation by France could not be an isolateu action, but must necessarily be part of a concerted general stabilisation oi all the principal currencies. Recently the discount rate of the Bank of France was raised to 5 per cent, in the hope of checking the outflow of gold. Thehoarding of gold by firms and individuals, who had lost confidence in the monetary situation in France believing that deflation is inevitable must be enormous. It is want of confidence that is at the base of the trouble. It is always possible that the Blum. Government will he rooted out of office. A French authority says:—“The social reforms have been put through, and the experiment of the ‘Popular Front’ of whose existence they were the justification is virtually completed. Consequently many members of Parliament belonging to the Coalition will resume their liberty of action at the first opportunity, so making possible the constitution of a great Ministry of National Union, which will have the heavy task of returning upstream. Constitution, the State services, the national economy, labour and leisure must all be adapted.” Devaluation is the first step in this programme and this has been taken. France has come into line with Britain and the United States and goes “off gold.” Holland and Switzerland, the other members of the Gold Bloc, have quickly followed France. Poland is not yet “off gold,” but when all the world has taken that step it will be possible by general agreement to set up an international standard. Britain and the United States have helped France in going off gold, not from any altruistic motives, but in the interests of world trade. The devaluation of the franc has opened the way for a new era ; at all events less will be heard of social credit, costless credit, and the various currency and credit nostrums. World currency stabilisation is imperative and a return to the gold standard equally' so. There is now not the same difficulty about the latter as there was in 1929, for there is an abundance of gold for monetary purposes and all the central banks of the world are well supplied with the metal. France’s monetary troubles will ultimately prove to have been the beginning of a return of the nations to sound money policies. With stabilised currencies and exchange international trade would speedily revive. It is now being checked by exchange control, quotas and other devices. LOCAL CONDITIONS.

Local economic conditions are in a state of flux, and the most capable expert cannot predict with any confidence what will be the trend. Early next year, in fact by the end of this year, when the companies begin issuing their balance-sheets, we will be able to form some idea. So far two concerns, the Otago Farmers’ Co-op. and the Kaiapoi Woollen Company, have given indications of the difficulties they have to face, while another concern, Beath and Co., Ltd., a drapery firm in Christchurch, reduced its dividend from 8 to 5 per cent., and has allocated a large sum as provision for taxation. All other joint-stock companies that are on the dividend list will be bound to do the same, for in every case they have to find more funds for taxation. They cannot satisfy the Government and please the shareholders at the same time, and ns the Government has the power to enforce payment. the shareholders must suffer. This aspect of the matter is compelling capital to readjust its views, and a trend in investment in Australian securities on a larger scale than usual

is bound to develop. Australian jointstock companies appear to be booming and the recent remission, in taxation is proving very useful in helping to expand business.