SUPPLY OF MONEY

New Zealand Herald, Volume LXXVI, Issue 23394, 10 July 1939, Page 5

SUPPLY OF MONEY

CHANGES IN THE DOMINION HEAVY RISE IN ADVANCES PRECIPITATION OF CONTROL An examination of the changes in the supply of money in New Zealand in recent years and of their relationship to the policy of control which the Government has found it necessary to adopt is made in the current bulletin of the Canterbury Chamber of Commoree, which is prepared in consultation with the department of economics of Canterbury University College. The changing amount of money available for lending, it is pointed out, is seen best in the excess of deposits over advances .shown in the bank returns. The appended table is set out, combining total deposits at the trailing banks and the Government deposits at the Reserve Bank, as well as advances to the public from the trading banks and advances to the Government from the Reserve Bank. The net overseas funds held by all banks are added for comparison. The total bank deposits and advances of the Reserve Bank and trading banks are as follows:

(£ .Millions) March Net Quarterly Excess Overseas A vge. Deposits Advances Deposits Assets 1031 . (12.: 5 -lUi 20.7 1 . 71.5 25.-1 4:1.2 Hi:to . 72 2 '15.1 27.1 <11.2 "l !»:i7 7.!.:? 50.:$ 17.0 ai.-l 1 !>:ts . 71.fl (10.15 11.3 25.0 1030 . (i!>.s 7*1.0 -5.1* 8.0 •Excess of advances. Proceeding to review these figures the bulletin states: —"A very close connection between the excess of deposits over advances and the total amounts of overseas funds is seen if the last two columns are compared. It is noticeable that declines in the excess of deposits are accompanied by very similar declines in overseas funds. This relationship has always existed and is likely to continue. Any contraction in the excess of deposits is likely to he reflected in a contraction of overseas funds, while any expansion in the excess of deposits is normally accompanied by an expansion in overseas funds. "Since the exceptional feature of the present situation is the heavy increase in Reserve Bank advances to the Government. for purposes other than dairy produce, these advances must be held chiefly responsible for the present shortage of London funds. They created claims on the Reserve Bank which were exercised, first, in payment for goods in New Zealand, and later in payment for imports brought in to satisfy an increased demand created by the expenditure of these advances.' "Had there been no such advances, total advances from the banks in New Zealand would have been about £12,000,000 loss than they are and the overseas funds held bv the banks would have been about £1'2,000.000 greater. That is. thev would have exceeded £20,000.000. Consequently they would have been adequate and the necessity for exchange and import control would not have arisen."

SOUTH AFRICAN CURRENCY FARMERS URGINC DEVALUATION Farming interests in the South African Parliament have been agitating for some time for a devaluation of the Union currency 2-1 per cent, as a cure for the depressed markets for agricultural produce, but hitherto without any success, states the Financial News. A deputation representing Western Transvaal maize growers arrived at Capetown on Mav 28 and interviewed the Finance Minister, Mr. Havenga, strongly urging upon him the devaluation plan. Mr. Havenga told the deputation that, under no circumstances would the Cabinet agree to such steps. The example of Australia, he said, had failed to impress it. The farmers, in consequence, are now consulting other Ministers with a view to securing assistance in some other form. BRITISH WAR LOAN British AV ire less LONDON, July 7 War Loan. 3} per cent, was quoted at £93 16s 3d to-clay, compared with £93 12s 6d yesteraay t