THE FINANCIAL CRISIS.

New Zealand Times, Volume XXXIV, Issue 5670, 2 June 1879, Page 2

THE FINANCIAL CRISIS.

TO THE EDITOR OF THE NEW ZEALAND TIMES. Sir, —The financial crisis which we are now entering upon, and which is beginning to make itself felt in every class of trade and society, naturally leads us to look for its cause, and to endeavor as far as possible to find some means ere it is too late to stay its disastrous effects. A great many reasons have been assigned as the true cause of the present commercial depression, chief of which is that the banks have made unnecessary withdrawals from the public. Though I do not wish to entirely exonerate the directors of those useful institutions from blame, still X think we must admit that an equal, if not greater, share of the blame .-b iM attach to those who during the time -.a.ks were giving these facilities, borrowed to an unwarrantable extent for purposes of speculation, without considering the question of repayment. As far as X am able to understand the case, it stands thus : the banks of the colony and

others who had credit in London found little difficulty in getting on deposit and by other means large sums of money at low rates of interest; tempted by the high rates ruling in this colony, it not unnaturally .soon found its way into our mark t. As comp-titiou grew keener less care was taken in iu-isting on a fair margin of security. This enabled many with little or no capital to acquire landed property. As funds continued to How fu laud became in greater demand, and prices reached to an unprecedented height; but what was at first only entered uuon by legitimate investors, tempted speculators and sharpers to go into the market and then the whole land business degenerated into a species of jobbery —little better than gambling. These speculators, as is usual in such cases, at first realised large profits from the ever gullable public, who, readily taking advantage of the facilities offered for raising money on L- N. s, &c., eagerly invested in laud, with anticipations of large immediate profits. This fever seems to have taken hold of all classes of the community, and I believe it wa not unusual for merchants and other otherwise shrewd men of business to withdiaw large sums from the ordinary channels of trade to invest in these rash speculations. Of course, during this time of excitement many far-seeing and ’cute men made umuey by selling before the crisis arrived, but by far tho greater number, on tho banks putting on tho screw, were placed iu very straightened circumstances, and not a few were compelled to seek the protection of the Insolvency Court. Has spirit of speculation and overtrading seems to have nut been confined by any means to iaud-jobbing, but to have spread into all kinds of commerce.

How long it would have continued, or what unhealthy business tone would have been its outcome, is a phase of the question I am not prepared to debate ; but I do maintain that disastrous failures iu the old country, of which the City of Glasgow Bank was the chief, and which have caused so much distress iu that country, have been to us a great boon. This statement may appear at first sight very absurd, but I nevertheless maintain that anything which would tend to put a stop to this spirit of over-trading must eventually be looked upon as having conferred a great benefit on the community at large. To connect the great failures at Home with the present scarcity of money here seems to require little or no explanation, but for tho benefit of those who have not given tho subject a thought, I may state that the euorraous sums required to meet the discovered deficiency iu the funds of the City of Glasgow Bank and other like institutions must have been principally raised on the Loudon market, and must of course, in the ordinary way of business, have created a vacuum, aud to fill that vacuum the first moneys taken would be naturally those most readily available, viz., the deposit amounts. This would at once be felt by our colonial banks having London agencies, from which they largely draw supplies, and would in a great measure account for their putting on pressure here. I find I have already exceeded my original intention in so far prolonging these remarks, but will, it you think them worthy of publication, on a future occasion send you a tew suggestions as to the best means in my opinion of reviving a healthy commercial tone.—l am, &,c., Nil Despf.rjlkdum.