CENTRAL BANKS

New Zealand Herald, Volume LXXII, Issue 22131, 10 June 1935, Page 5

CENTRAL BANKS

FUNCTIONS AND CONTROL PLACE IN NEW ZEALAND CO-ORDINATING INFORMATION "In the twentieth century a central bank is scarcely necessary in Now /enland, as it has sometimes been elsewhere, to check the rash excursions of irresponsible private bankers, but it may be useful in inaugurating and maintaining a wise policy of development which might otherwise be unreasonably delayed," said Dr. A. G. B. Fisher, professor of economics in the University of Otago, in a lecture on central banking delivered in the Science Congress of the Royal Society at Dunedin.

"The technique to which central banking theorists have paicl most attention in recent years involves the socalled 'open market' operations, the buying or selling of securities by the central banks at times when it is thought desirable to expand or to contract the aggregate volume of credit," I)r. Fisher said. '.The range of openmarket operations, however, inevitably depends on the existence of an adequate volume of securities of the type in which a central bank may appropriately have dealings, and an important practical distinction arises here between the financial structure of the older countries with highly developed money markets and of never countries where the money market is still rudimentary. Dominion and Abroad

"In the former group there is an active and sensitive market for Government securities, which are constantly being bought and sold in large quantities, but in the latter the market is often sluggish. Quotations may be merely nominal, and there may even be times when there are literally no potential sellers at the quoted rate. "In these circumstances even a trifling intervention in the market on the part of the central bank might have such disproportionate effects on the prices of securities that open market operations on any considerable scale are in effect impossible. New Zealand is certainly a country of this type, and even if the Reserve Bank Board was not disposed to act cautiously in the first years of its existence it would find it extremely difficult to use open market operations effectively in the Dominion. "The limitations thus suggested by a survey of traditional central banking technique do not, however, necessarily leave our central bank completely impotent. While the aggregate volume of credit is undoubtedly an important factor in determining the smoothness with which the operations of the economic machine are carried on, recent experience has shown more and more clearly that the correct distribution of credit between the various industries calling for it is no less important, and the central bank could give valuable guidance to the individuals and institutions who aro responsible for this distribution. Secrecy in Business "The Central Bank is in an unusually favourable position for collecting and interpreting the information that is necessary if errors in investment are to be reduced to a minimum, and it is on that account that it is desirable that the Central Bank should cease to concern itself exclusively with the quantitative control of credit. "The business world as a whole suffers severely from the well-estab-lished tradition of secrecy which makes it inevitable that even the most important decisions have to be made on a basis of quite inadequate knowledge. It can scarcely be a matter for surprise that individual business firms are often unwilling to let their rivals know what they are doing, but wasteful overdevelopment would often be avoided if, even without such detailed knowledge, they had more exact information about the trend of industry as a whole. "No trading bank, by itself, has at its disposal all the information which is needed; the Central Bank alone, by virtue of its most essential function as co-ordinator of the banking system as a whole, can stand above the competitive struggle."

FIRM BUTTER MARKET AN UPWARD TENDENCY CHEESE REMAINS QUIET The London butter market is reported to be firm, with an upward tendency. Quotations for choicest salted New' Zealand range from 82s to 84s per cwt. Cheese remains quiet at from 42s to 44s per cwt. Merchants have received the following cablegrams, dated June 7, from their London principals:— Air. H. S. Withers, from A. C. Rowson.—Butter: Finest, 84s; first grade, 83s. There is a good demand and the market has an upward tendency. Cheese: White, 43s 6d; coloured, 445. A. H. 'jiurnbull and Company, Limited, from W. Weddell and Company, Limited. —Butter: Danish, 98s; New Zealand salted, 83s; Australian, 82s. The market is firm. New Zealand cheese: White, 435; coloured, 43s 6d. The market is quiet. Now Zealand Producers' Co-operative Marketing Association, Limited.— Butter: New Zealand, 82s to 83s Gel; Danish, 98s. The market is firm. Cheese: White, 42s 6d to 435; coloured, 43s (id. The market is quiet. Allen and Findlav, Limited, from Armour and Company, Limited. — Butter: The market .is firm. New Zealand, salted, 82s to 83s; nnsalted, 80s to 82s; Australian, 82s; Danish, 98s. Cheese: The market is quiet. New Zealand, white, 42s to 435; coloured, 43s to 445; Canadian, 60s.

MINIMUM F. 0.8. RATES

AN•UNCHANGED SCHEDULE

[BV TELEGRAM! —PRESS ASSOCIATION]

WELLINGTON, Saturday

The Dairy Produce Board has fixed minimum f.o.b: prices on the basis of 104 per lb. for butter and 5d per lb. for cheese. These rates, which are equivalent to 87s 7d and 44s per cwt. c.i.f.e., are unchanged. N.Z. AND RIVER PLATE INTERIM DIVIDEND DEFERRED The directors of the New Zealand and River Plate Land Mortgage Company, Limited, have decided not to pay an interim dividend, but to postpone the question, of distribution until the end of the year, according to cabled advice received by the New Zealand attorneys, Messrs. R. G. Milligan and A. Owens.

The interim dividend was deferred last year and a payment of 3 per cent was made in January. The distribution in the previous year was 5 per cent.