HOARDING OF MONEY

Southland Times, Issue 21576, 14 December 1931, Page 2

HOARDING OF MONEY

NERVOUS AUSTRALIANS.

CONFIDENCE NOW RETURNING.

Sydney, November 2b.

Evidence is not lacking that there has been a considerable hoarding of cash, particularly bank notes, by Australians during the past few months. Normally residents of the Commonwealth are notoriously free spenders. In times of prosperity they have turned over their cash with a ready hand.

Accustomed to keeping their resources readily available many Australians were alarmed when, earlier in the year, an economic crisis threatened. The air for a time was thick with rumours of impending trouble for the big trading banks. Most of these stories were invented, but those who kept their heads received a rude shock when the Government Savings Bank of New South Wales suspended payment. It was about that time that thousands of Australians became hoarders. In the first few months of 1931 there was the customary back-flow of cash from the public to the banks. It was reflected in movements in the distribution of the note issue. At the end of December last the face value of notes held by the public was £24,419,692, of a total issue of £48,153,426, the remainder being in the vaults and tills of the banks. In January the issue was reduced in total by £2,500,000, the public having £1,699,779 less and the banks £800,221 less.

Then came the period of acute nervousness, and, taking the record of the Notes Board as a barometer, many people commenced in earnest to pile up secret resources in notes. They had apparently lost confidence in the big financial institutions and were resorting to the practice of hoarding. The call for notes increased and between the end of February last and September 28 holdings by the public had risen more than £3,000,000. That movement did not have as corollary or consequence any commensurate expansion of trade and commerce. On the contrary, it was accompanied by an allround shinkage in turnover in most departments of business. It was, therefore, a reasonable inference that a considerable portion of the extra cash, represented by the additional notes had been “tucked away” for a time—it became idle money. Now the tide seems to have definitely turned. Last month the public returned to the banks £323,884, giving an indication of the restoration of confidence. There had been a smaller return of notes in July, but it was followed in August by a recurrence of the rising trend in public holdings, the sum of which was increased by £901,452 of a total addition of £1,000,000 to the aggregate of notes outstanding.

Indicative of the nervousness which induced much of the hoarding was the heavy drain on the liquid resources of the Government Savings Bank. It has been stated that within a few months preceding the closing of the bank it paid out £16,000,000. Actually it paid out £16,000,000 more than was paid in. The amount that was withdrawn by depositors was really £42,000,000. Where did it all go ?

It is admitted that some of the withdrawals were due to the fact that the depositors had lost their positions, but more were due to lost confidence. It is now hoped that the public has agreed to spend wisely an 4 release at least a portion of its hidden savings.