WAR AND FINANCE.

Otago Witness, Issue 2653, 18 January 1905, Page 51

WAR AND FINANCE.

A BRITISH PERIL.

(Fjiom Otjk Own Correspondent.)-

LONDON, December IU.

.A writer well known as an authority o> finance has called pointed attention to a new pubiic peril, which does not seem hitherto to have received due consideration.

After remarking that events are passing in £he Far East fraught with tremendous contingencies impossible to foresee, and that an indiscretion — calculated or other — of some subordinate officer (Russian or Japanese) may plunge us into war, in a day, as the ally of Japan against Russia and France combined, he says: — "W« keep our navy prepared. Is our finance equally prepared? Finance is an integral part of any scheme of Imperial defence. Is finance adequately represented on tha Committee of Imperial . Defence, and, 1 ii not, why not? It is vital. Some of th« salient facts are well enough known. Iv this country there are to-day deposits on call (including the savings bank) of about £1,000,000,000, with a reserve of £24,000,000 — less than 2£ per cent. That is a fantastically insufficient reserve, if there were no possibility of war. No one can call it a prudent or decent banking position, even in times of absolutely assured peace. Included in our liabilities there is more Continental money in England than there has ever been -before, and a very large amount of it French, Eubject to instantaneous withdrawal. In normal conditions it will probably never be withdrawn; but in case of a war in which France were to be implicated, it would, of course, be withdrawn, as one of the principal objects of an enemy's strategy would be the wrecking of our credit edifipe." " Our handiest war- chest," he points out, "is our holding of- American securities. There is no free market outside of London and Paris for South Africans and Argentines, and no other country has ever hankered after our colonial stocks; biit there is always an independent- market in New York for our American securities, and they happen to be a very liquid asset at present. Here, again, however, we must take care nob to count our chickens before they are hatched. .who keeps a watchful eye on events in the United States-gnaust be aware that atfcthis very moment, and for years past, the banks and trust companies have been increasing their loans at -a most alarming and dangerous rate.. Their "deposits now amount to £2,ooo,ooo,ooo— jusfc double our British deposits ;— and, althoughthe United States' stock of gold is very much larger than ours, any future sudden withdrawals of gold on a large scale might produce chaos there in the present most inflated financial condition. It is, of course, quite true," he admits, "that there is an unthinkable amount of gold, below the surface, in South Africa ; but it takes time to get it out, and the North Sea ' incident ' has warned us that world-changing event's may take place in the twinkling of an eye. Therefore, we must not be caught napping. We ought to try to explain to ourselves why it is that, notwithstanding an increase of the world's gold production iv the last 10 years of over £500,000,000, the Bank of England — the financial centre of the world — holds less gold to-day than it held 10 years ago, while the gold holding of every other country has enormously increased.

"If I may venture to give my own. explanation," he goes on to say, " it is that the Bank of England has been for the last seven or eight years merely a sieve, through which the gold runs out as fast as it comes in, owing to the constantly increasing excess of our imports over our recorded and invisible exports, and the consequently persistent adverse foreign exchange. This must necessarily be the effect okunbridled- national extravagance. . . . Do not let us deceive yourselves. Do not let us drift; and let us always remember that more is known in Paris, in Berlin, in Frankfurt, in Hamburg, and in New York — or even in St. Petersburg — as to our bank reserves and liabilities, and as to the true relation between our imports and our exports, than is known by the average Englishman.

. . . The policy of the ostrich is always foolish. We are strong enough to take our heads out of the sand. The light of the world plays round our financial position. Everything is known — the weak points /as well as the strong points. As business men we ought surely to satisfy ourselves and our neighbours — friendly and others — that we are ever watchful over our. high credit, which is a national asset of incomparable value." -

The people of England are reniincled that a not unfriendly German critic (Professor Schrnolle-r) said, on September 7 last: "The food supply of the country (England) is not so well assured that reform is not desirable, and that an imperilled situation in the future — and even, in certain circumstances, catastrophe — might not be possible." These points, as the French phrase ie, "give us furiously to think " !