Stratford Evening Post With which is Incorporated “THE EGMONT SETTLER" Established 1890. THURSDAY, JULY 2, 1931 THE DEMAND FOR MONEY

Stratford Evening Post, Volume I, Issue 173, 2 July 1931, Page 4

Stratford Evening Post With which is Incorporated “THE EGMONT SETTLER" Established 1890. THURSDAY, JULY 2, 1931 THE DEMAND FOR MONEY

IT is pleasing to note that the two banks closely associated with the Dominion, the Bank of New Zealand and the National Bank of New Zealand, have both risen superior to the conditions, states the Oamaru Mail. The Bank of New Zealand paid the usual dividend and a bonus to 1 per cent., and the National Bank is paying 10 per cent, as in the previous year. Contemplating the huge amounts on deposit with the banks, both free and fixed, there are those who assume that there is ample money available, but they fail to take into account the fact that bank assets consist of the debts due to them by the public. The advances are debts of the public and assets of the banks. There is therefore no great amount of capital. The free deposits and note circulation represent the current spending power of the people. The fixed deposits, which have steadily grown during the past five years, may be viewed as investment money, that is money which might be placed in long-term securities, and that the funds are not so invested is an indication that the owners are lacking in courage and confidence, or because they can find no investment of a suitable character. The Government is offering for sale, over the counter, sixyear debentures bearing interest at 51 per cent. This would appear to be attractive, but it is not being taken up readily because 51 per cent, bonds maturing in 193 G can be obtained at a lower price than the debentures that are being sold over the counter. The Dunedin Chamber of Commerce is urging the Government to # cease selling 51 per cent, debentures and to offer not more than 5 per cent., and suggests that local bodies and State Departments should do the same. The desire of the Chamber of Commerce to see the price of money decline is certainly very desirable, but the price of money cannot be lowered or raised by arbitrary means. The rate is comparatively high just now, because the demand far exceeds the supply. Apart from the sale of debentures by the Government, the Christchurch Drainage Board is endeavouring to obtain about £35,000 by the sale of 51 per cent, debentures, yet the market price of similar debentures is well below par. In addition to these .issues several companies are offering for sale bonds of various denominations. Those promoting the ventures are obviously very optimistic, and they are destined to be disappointed with the results. The country does not appear to have surplus funds for investment, and little enough for existing concerns that want to increase their capital resources. This extraordinary demand for capital is keepinn up the rate of interest and no on (lie part of the Government can alter the position. ’riie Government could, of course, decide on paying 5 per cent., but in that, case very little moimv would come into the Treasury from the sale of debentures, mid as funds cannot reasonab 1 ' be raised in London, the Gove’”iment offers a price in the domestic market that will produce the

required results