WAR AND FINANCE.

Poverty Bay Herald, Volume XLII, Issue 13714, 18 June 1915, Page 7

WAR AND FINANCE.

BANK PRESIDENTS REVIEW

(Special to Herald.)

WELLINGTON, this day. ''It is impossible for me to avo.d reference to tlie great conflict that is : now convulsing the world," said the chairman of directors of the Bank of New Zealand at the annual meeting to-day. The war. iii which practically all the great Powers arc engaged, has had, and must continue to have, a .very disturbing inliuence on finance, trade, and commerce. Great and profound economic clian'ges have occurred! and ho one can as yet faintly estimate the fax reaching elfects of the titanic struggle. The measures adopted by tho British Government tu meet the linancial difficulties have proved on the whole.effective, and have gone far to assist in maintaining the pre-eminence of London as the world's great financial centre. Whilst other countries have found it necessary to prohibit the export of gold, Britain has preserved its traditions and maintained throughout a. free gold market, except, of course, for exports to enemy States.

The opening of the London Stock .Exchange, whicli took place on 4th January, was attended by the imposition of very stringent conditions, designed to prevent the Stock Exchange being utilised as a. channel for realisation of enemy securities.

Recognising the important part which finance must play in the war, the Brit-ish-Government has determined to conserve British financial resources to the utmost extent possible, in order 'that supplies for war purposes may be available, as and when required. With that end in view, it has practically taken control of all new capital issues in Great Britain, by providing that no issue shall be made that' has not been previously approved of by the British Treasury. The' principle upon which' the Treasury will discriminate upon any proposals jnado to it, will bo whether or not the contemplated issue can be shown to be "advisable in the national interest."

This regulation, it will be at -o&ce seeii', closes the London money majjjfet to all issues of capital on aecouh^of undertakings unconnected with the JJ-wt-ish Empire that a-re not in close association with Imperial interests. "'AA. Tlie result is, that the vast streamfoi credit constantly flowing to Loncftin from Britain's -world-wide investments is accumulated there as in a financial/reservoir ; the outlet of which is controwed by the- British Government. lii .'.'this way, supplies of that essential sinetMof war — money— are assured, not only |f or the British Empire itself, but also ,f or her Allies. The facility with which all needs h|"ve so ffir been, fully met, at rates fluctuat-ing—-as far as the British .Govei'iiiniftnt is concerned — from a little over 3r per cent, to a little under 4 per cent., is.. at once a' testimony to the effectiveness! df the measures adopted, and to thjo <wntinued strength and soundness of Br_ljssh credit in these credit-shaking timeg.?J|'. I do not wish to bo understad|jlfas v minimising the serious financial ■' atid, economic bearings of the position in, which tlie world has been placedj/by the war. One cannot but regard with serious misgivings, the diversions of si*ch unmense volumes of capital from remunerative enterprise to the business' of. destruction, which leaves only devastation and no taiigibi *•. asset iu its wake. ' Tile mind is lairly staggered when it. thinks of the economic problems with which the civilised world will lie' laced when this— the greatest of all wars— has been brought to a termination. The figures that will be represented, ;by the actual war expenditure, by the loss ol income resulting from the paralysation of industry, and by, the enormous value of property absolutely destroyed, are at present quite unthinkable; and when we add to themthat greater, because irreparable, loss, rot measured in monev but in human lives, wo turn from tho contemplation of it all with a distracted brain and a sickening heart.

For us, •• he only consolation lies in the fact that the conflict has been forced upon us; that we are lighting the fight of liberty and justice, and that with tiSg victory which we confidently anticipaWl will be ours, may come an assurance, of an enduring peace >vhioh, . in the years jet to be, Mill 'perhaps compensate in some measure for the losses and distresses of the present. The British Government, feeling the importance of confidence as an essential to the maintenance of trade, announced, in the early days of the war, t^he establishment ot a Government insurance bureau thro'jgh which cover for war fisk could be obtained, eharging for this national service the lowe3 possible rates LOiusistent vith tic partmental solvency'. This facility ha& been of the greatest assistance to shippei*". to and from all parts of the 1 vitisli Eihpire. It has enabled them to obtain full cover for all their shipments at reasonable rates. It is question ible w.nether, . without t, umrderwriters w.>ild have been able to rn* . ct the demands '.spun then?. . In any eve, i the rates for war risk would prdbably jluive been prohibitive. The; bank's serrvjees have been at the disposal of its I shipping customers, and the aggregate of war risk cover efi'ected ip ' London tbrough the bank's agency has reached a large total. Referring then, to tho, meapiH-ps adopted in this Dominion, viz., the notes legal tender pi-ocla-. ination, tke prohibition of gold export, and the Mortgages Extension Act, the chairman said : Tlie last-named Act 'has, unfortunately, proved somewhat un- • satisfactory. Designed primarily for (the ppotpbttoni of mortgagoi*s against j possibly unjust ii-nd- arbitrary action by mortgagees, it has no doubt been of .much service in preventing hardship to mortgagors. But the Act has been taken advantage of by quite a number of mortgagors who, being in the enjoyment of a. low rate of interest, haVe, whilst possessing the means' to discharge their liabilities, claimed the protection of £h© Act and utilised thei*. available funds in lendipg ot] mortgage themselves ab higher "rates" of interest. Tliis is, oi course, a perv^rsjpni qf the .benefits conferred by .he /ct, and ji is upde**4epd that, in the coming Pari i amen tary session, the matter will Receive attention at the hands of the Government.

There is no reasoib to anticipate tbat a substantial drop inrnoney values will take place after the conclusion of the war. Not a' few in a ppsition -to judge take the view ,th»t there wil 1 t]*en be still further appreciation, and'iny own opinion is that those who are re*arj"ftnging their mortgage liabilities, as ihey mature, on the l>est terms possible, are acting with a measure of prescience which future events will fully justify. The prevailing conditions in the great monetary centres of the world are bound to be. reflected, sooner or later, in our local market ; and, as I see no indication of easing prospects in the centres, 1 1- am forced to conclude that money values aro likely, for the present, to remain comparatively high. It is- true that there is not, in tlie meantime, an.y shortage of money; but this is largely flying tp the fact. that enterprise is -stagnant, and that t.a&e generally is running in much restricted channels. When the future is more assured, tlie supplies of floating capital will probably be quickly absorbed and money may become scarce. After the war is over, if the conditions' of the international settlement are suich as hold out prospects of a lasting peace, andnif cessation* of <$on*-petition in armafljehts', ther.e ipay be after a few yeai* a permajient drop in money values, but I ,d_ not think that point will tyi peached for ,«ome tiine. ' ' Tho influence pf ,{he waj* on lqcal bodies was next referred to. Itr Beaqcijamp expressed the opinion that it *v<|s it* speed ingly -u*aljkp|y that the Tendon money market, even after the terminal tion of hostilities,, will beoomp favorable for the issue of loans for some time. | The demand for capital to make good' the destructioi- that has been wrought .by the war will be enormous, and the Isburces of supply will, to some extent, have run dry. It is, therefore, only reasonable to assume that it/ may he some years before the financial equilibrium is restored and normal conditions again, prevail. In any case, when considering the question of loan flotations, borrowers will no doubt have tp re-ad-jus*. their icjeas at*, to ratps, fof when,

there is bound to bf. ** great rush for applications, andthi"*- naturally will result in lenders demanding higher rates than those which in recent years they have been ready to accept. After dealing in an interesting manner with trade, industry, and internal finance (a report of which is reserved), the chairman went o nto speak of the outlook. I think, he fcaid, "w& may look for a continuance of good trade." The end of the war may be followed by heavy taxation, and unemployment in those* countries now engaged in. hostilities, but New Zealand is still bound -to find an outlet at remunerative prices in Great Britain, the Continent of Europe, and the United States of America for' her wool, frozen meat, dairy produce, etc. It would, of course,, be unreasonable to expect the abnormal rates at present ruling for the articles enumerated, but there is little doubt that the demand which will then exist for our primary products will enable us to face the future with equanimity, and assist u s in discharging the heavy liabilities we have directly undertaken in. connection with the war.

j The war is costing the Government a i substantial, sum, and I am convinced that' prudence ahd reasonable economy are being exercised in the expenditure. The cost of the war must be met by increased taxation, and > no doubt we' may expect to have proposals submitted under this head in the course of a few days. The country is well- able to face this increased taxation; indeed, looking at ah the circumstances, it was never better fitted to stand a pressure. I The. commandeering of so many of our insulated steamers for troopships has hampered exporters considerably, and has caused some inconvenience; but the Government is. making every effort to provide a sufficiency of insulated ships, and it is anticipated that the difficulty will be overcome by the end of July. ■ Some change in the incidence of trade i-_ certain to follow the rupture of the old commercial relations occasioned by the war, and new trade, routes are already being pricked out on the map. Germany, for long years to come, Will, I hope, be commercially ostracised. The trend of public feeling the World over seems to point jn that direction. New outside markets :wi 11 therefore *- have to be exploited, andfresh industries within the 1 Empire itself established and developed. Japan is already in the field, and quite recently a distinguished deputation visited the Dominion with a view to opening up fuller trade relations between the two countries. There is a possibility of an early inauguration of a direct steamer service with Japan. Already the .trade ot Australia and New Zealand with the United States of America and Canada has taken ■& ; forward, bound, largely encouraged by the iopening up of the Panama Canal.. Larger shipments of wool and concentrates have been made from New Zealand and Australia to Boston, and other American ports. Wellington will be a frequent port of call — for coaling and other purposes — on this mew trade route. The trade with the United States is bound to develop, and it is the duty of our merchants to help, in the development, at the same time taking care that th-"-pernicious American system of combines and monopolies is not allowed to obtain a footing. Trade with Canada, too, is destined to grow, and it is not unlikely that closer political relations will be established with the sister dominion after the close of tho war. China and Russia- are, commercially speaking, lands almost-unknown to these islands, but it is fairly certain that they will not long remain "so; and when we come to reflect upon their immense populations and their boundless resources, the trade possibilities opened up appear to be illimitable. / It is noteworthy tliat tho wars of the early part of the nineteenth century laid the foundations of the peace upon which the phenomenal social and industrial developments of tlie later part of that century were based, and now, in this twentieth century, history niay repeat itsr-lf ; and when thß knell of militarism has been sounded, and the : nations have turned their energies again to the arts of peace, developments as yet undreamt of may take place. The next hundred years may witness the attainment of .jtajges of further progress in arts,' sciences, industries, '.-social ."' conditions, ; ;and international relationhips which will outstrip even the nineteenth century record, and present contrasts. with existing conditions more remarkable and important than those of any of the penturies of the past.