COMMODITY MARKETS AND PRICES.

Manawatu Standard, Volume LIX, Issue 101, 29 March 1939, Page 4

COMMODITY MARKETS AND PRICES.

THE INTERNATIONAL SITUATION (By The central banks of Switzerland, Belgium, and Holland have transferred their gold stocks to London and New York, and with the insurance rates on war risks definitely raised the serjpusness of the international situation is obvious. The fact that the King of Italy in his speech to the Fascist Council referred to the demands of Italy on Franco and was followed by Signor Mussolini adds to the, danger. Commentators, however, see in his speech less provocativeness than anticipated. His dcma.nds on France, however, contain the germ of a serious explosion. BANKING. The position of the Reserve Bank continues unsatisfactory. Jt is now nearly four months since the control of imports and of exchange was imposed, and yet the position of sterling funds is worse now than it was in December. For the week ended March 20, sterling funds decreased by £43,823 to £4,547,863. But the liabilities in other currencies had increased by £15,339, thus reducing the net overseas assets to £4,515,396, making the proportion of ri'scrvo to liabilities 25.129 per cent. On March 21, 1938, the proportion was 73.143 per cent. Tt is difficult to visualise the Reserve Bank accumulating any large amount of sterling funds, for apart from the proceeds of dairy produce there is no other source that, can be named. AYhen the Reserve Bank started on August 1, 1934,. it took over from the Government sterling funds to the amount of over £24,000,000. This amount was accumulated after the exchange rate was arbitrarily raised from 10 per cent, to 25 per cent. Those funds have been steadily drawn upon, and no small proportion has been absorbed by the Government. The Reserve Bank is not in a position to accumulate sterling funds rapidly, and so exchange control may be maintained for a very long time. Advances to the Primary Products Marketing Board now amount to the huge sum of £7.388,640, having increased by £71,314 during the week. Advances to the State for other purposes were reduced by £415,000. and totalled £12,250,000. which is still a rather large amount. There was an increase in the note issue of £26,235. to £14.825,501, which is £1,295.260 more than at the corresponding date last year. U.S.A. GOLD STOCK. The United States now holds over £3,000,000,000 worth of gold, and is bound to receive further ' large amounts, so long as the tension in Kuropc continues. All this metal is not the property of American banks, or the Federal Reserve Board, for a largo proportion of the gold belongs to Kuropean banks and has been sent to America for safe keeping. This involves the European owners with considerable expense. First there is the charge for shipping and insurance, and incidental land transport charges, and finally the rental for the storage and safety of tlie metal. The United States must be making a handsome commission out of this. The Secretary of the Treasury (Mr Morgenthau) told the Senate Banking Committee that there was no fear of gold being demonetised, or the current value of the metal (140 s per fine ounce) being changed. These are two important statements. The demonetisation of gold is unthinkable. Its main function to-day is to settle balances between nations, and there is very little of that doinsr just now. Gold is the one commodity that the nations are willing to admit duty free,

because it is the monetary metal of the world. Gold coins will be accepted anywhere at any lime. For example, if a New Zealander were abroad with 100 sovereigns and £IOO in Reserve Bank notes, the lallcr, outside the three miles limit, would have no value whatever. A visitor to Australia, recently returned expressed the opinion that it was doubtful whether one could get a packet ol cigarettes in Australia for a Reserve Bank pound note. Our paper money is isolated; it is money with us, but not with other people. Gold, on the other hand, is freely accepted in all countries, and is therefore real money. It is scarcely probable that the price of gold will bo changed; at any rate if there is any change it would be upwards; that is the price would 1*? raised rather than lowered. There is enough gold available in the world to finance two or even threo times the volume of international trade. But there is a mal-distribution of the metal, for Germany, Italy and Japan have very little of it. This mal-distri-bution will continue untiL there is a genuine revival in world trade, and that depends upon world peace. TREND OF BUSINESS. The Bulletin for March, issued by the Canterbury University College, says; —“Whatever policy is followed in New Zeala.nd now, it is inevitable that consumption must fall, and the standard of living reached in 193 S suffer a reduction. In 1937 and 193 S spending in New Zealand was based upon a high export income and on the using up of reserves accumulated in the past.” This is our position to-day and stimulating industries will not affect a cure. When a joint-stock company spends heavily and uses up its reserves, its position is precarious, and the only thing it can do is to economise, endeavour to live within revenue and build up reserves. The State is a joint-stock company on a large scale, and therefore the State cannot act differently from an ordinary joinCstock company. There is not one economic law for a trading company and a different economic law for the State.