THE New Zealand Times. (PUBLISHED DAILY.) TUESDAY, OCTOBER 19, 1897. THE BANKING RETURNS.

New Zealand Times, Volume LXVI, Issue 3261, 19 October 1897, Page 2

THE New Zealand Times. (PUBLISHED DAILY.)

TUESDAY, OCTOBER 19, 1897. THE BANKING RETURNS.

With which are incorporated the Wellington Independent , established 1845, anti the New Zealander .

In connection with the returns and comparative tables furnished to our readers yesterday, it may be pointed out that while the decrease in coin and bullion in New Zealand has been alight, and while sufficient is held for our requirements, there is a tendency in the same direction as is manifested in Australia* Iu the sister colonies the decrease during the past year has been very large and if the drain continues its effect must be, we think, to make money dearer in the near future. It is curious to observe that while the Savings Bank rate has been reduced in this colony by i per cent* the Bank of England rate is feeittg increased, and this despite the drain of gold from the Colonies and ether countries to England. That our evening contemporary has once again fallen into error while discussing the questions of current account and the discount business of our monetary institutions is somewhat surprising in face of the fact that we were at some pains to explain -these very matters after the lost quarterly returns were commented upon in its columns. The contention that the large amount at credit of current accounts and the reduced discounting of bills points to stagnation in trade and in industrial development, or that’the traders are leaning less upon the financial institutions, is utterly fallacious. Current accounts, as we have previously pointed out, represent tbe funds used actively in trade. It is the fixed deposit that is the symbol of the stagnation of the money of the Banks customers. Reference to former periods of activity or depression in trade will prove this, as it has always been found that when trade was brisk and good—as it is at the present time, and as every trader in the colony acknowledges it to be—the proportion of current account, moneys in the Banks has been greater and the proportion of fixed deposits to current account money less than in time of depression. Another thing is obvious with regard to current accounts; that the more accounts there are and the greater the volume of trade, the more current account money will necessarily bo shown in the - returns as lying to credit in the conduct of these accounts. Thus, were our trade and population doubled, wo should expect to see the current accounts doubled also. But, as regards fixed deposits, we certainly should not expect to see a like increase, as they bear, in fact, very little relation to trade or active enterprise. However, while rates for fixed deposits are low, it is reasonable to suppose that Banks will ceaso to be the medium between capitalists and borrowers, and tbe fixed depositors, seeking to restore their shrunken incomes, will cast about for some method for employing their money more actively than per medium of fixed deposits.

With reference to discounts the fallacy is equally apparent. Retailers receive 2£ per cent, discount from wholesale houses by paying cash instead of giving three months’ bills, and 2£ per cent, for three months means 10 per cent, per annum. It is obvious, therefore, that the trader who cannot raise money at less than 10 per cent, to enable him to take advantage of the discount usually allowed for cash business must be indeed in a bad way and not at all the person who should be trusted as an acceptor to a bill. As a matter of fact, most of our traders at the present day pay cash to the wholesale houses in order to got the discount, and hence the decrease of the trade bills discounted in the Colony. While the rates charged by the Banks for advances were high—as they were a few years ago—there was not, of course, the same inducement to pay cash instead of by three months’ bills. But, while the rates for advances have gone - down, and that this has been largely induced by the cheap rates at which Government moneys are offered to settlers will not be disputed, the trade discount rate for cash has been maintained, namely, 21 per cent.