STERLING FUNDS

Manawatu Standard, Volume LVI, Issue 283, 28 October 1936, Page 2

STERLING FUNDS

(By H.J.K.) The demand on the sterling funds of the Reserve Bank appears to be very steady as will be seen by the following weekly figures: Week ended £ September 28 16,834,564 October 5 16,646,102 October 12 16,626,196 October 19 16,542,855 In three weeks there has been a reduction of £291,709. Unless the demands are very pronounced the bank should be able to add to its sterling funds • through the sale of produce abroad. Against the purchase of : dairy produce by the Government the Bank had advanced up to October 19, £2,417,217. This amount alone should yield about £1,750,000 sterling. The position of London funds with that held by the trading banks on September 28 was as follows: £ Reserve Bank 16,834,564 Trading banks 12,890,571 £29,725,135 In addition to the above amount the trading banks hold £5,785,499 elsewhere than in London. There is an abundance of sterling funds for this time of the year, for we are at the beginning of an export season. Although dairy produce has reached London, also some new season’s lambs, the bulk shipments, including wool. will not be going forward much before the end of the year. Next year we will need more than the normal amount ol London funds, because of the certainty of imports being very much larger and the exodus of people from New Zealand to attend the Coronation. But it is scarcely- wise to attempt any predictions regarding our finances because the economic structure of the country has l>een somewhat disturbed and the trends caused thereby are not as yet discernible. TRADING BANK RETURNS. The returns of the trading banks for the month of September were made available at the week-end, and a comparison of the figures with those for the corresponding date of last year is of interest. Taking first the deposits. The demand or free deposits show an increase, while the time or fixed deposits, decreased. The free deposits at the end of September amounted to £28.934,657, as compared with £24,635,039 at the corresponding date last year, an increase of £4,300,000. There are quite a number of reasons for this and perhaps the principal reason is the increase in wages. The fixed deposits totalled £34,485,842, against. £36.750.637, a decrease of about £2,300,000. Where this money has gone to is a bit of a mystery, but it is not unlikely that some of it lias gone into share investments, and some of it transferred elsewhere, for money is leaving the Dominion despite recent denials. The advances and discounts amounted to £45,999,813, against £47,711,493, a decrease of nearly £2,000,000. With so much inflated currency available the traders are not finding it necessary to seek bank accommodation. The effect of inflation is seen in the note circulation, which at the end of September totalled £7,711,941, compared with £6.492,841 at tlie end of September lust year, an increase of nearly £1,300.000. The purchasing power of the people is partly ascertainable in the following: Sept,. 1936 Sept.. 1935 £ £ Free deposits 28,934,657 24,635,039 Circulation ... 7,771,941 6,492,841 £36.706,598 £31,127,880 The spending power of the community as compared with a year ago is £5,600.000 more and therefore there should be all the appearance of a boom. FRANCE’S ECONOMICS. France is faced with the huge deficit of £250,000,000, and' this deficit will have to be funded, for the French people cannot stand up to further increases in taxation, for they are already very heavily taxed. France’s financial affairs have been a nightmare to successive French Ministries. At the beginning of August, 1935, the gold stock of the Bank of France was 71,582 million francs, equal to 575 million sovereigns. Twelve months later the gold stock had been reduced by 16,600 million francs, equal to 133.7 million sovereigns. In the interval the notes in circulation had increased from 81,489 million francs (656 million sovereigns) to 84.907 million francs (683 million sovereigns). The increase of 3418 million francs in circulation was accompanied by a fall of 3980 million francs in private deposits. The greater part of the increase in circulation has been taken for hoardings, and there is little doubt that the gold shown as having been taken from the bank lias been put into hoards, practically all in London or New York. During September a further £26,000,000 was withdrawn from the Bank of France, and that amount too has probably gone into hoards either in London or the United States, or whatever was acquired by the Bank of England, the equivalent would be held as deposits by English banks. The franc has been overvalued in the foreign exchange market for some time, and for that reason French export trade lias been suffering. The over-valuation. on the other band, tended to promote imports. The social and labour measures passed by the Blum Government have promoted rising prices, causing another check to exports, though the Government has undertaken to restrain the increases, especially as far as they concern the cost of living. However, if France and other European countries could be relieved of the fear of war, and international trade allowed to expand, France would soon be in a sound position. NEW ZEALAND CONDITIONS. We are now approaching the profittaking season, and there should be general activity. The exports of dairy produce are steadily increasing and up to October 19 the Reserve Bank bad advanced to the Marketing Department £2,417,000, which has gone mainly to the dairy farmers. Presently meat shipments on an expanding scale will begin, and wool will be on the market by the end of next month. There should be plenty of money in circulation and general trade activity should be in evidence. After this week’ people’s thoughts will turn towards Christinas and travel, and therefore the next three months should witness very heavy expenditure, and the Christmas trade should exceed all previous records.