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Taranaki Daily News, Volume LV, Issue 282, 21 April 1913, Page 4

GOLD. Tn his presidential address at the. annual meeting of the shareholders of the London City and Midland Bank a few weeks ago, Sir Edward Hohlen referred at some length to the difficulties created in the money market by the present scarcity of gold. His remarks are given some local point by the conditions that are' prevailing in this country to-day (remarks the Lyttelton Times). Hie. last few rears have witnessed a boom in trade all over the world and a consequent enormous expansion of credit. Credit, under our present financial system, whatever the future may have in store for us, can he protected only by an adequate amount of gold, and during the last twelve, nipnths there lias been: great rivalry between various countries; striving for high rates of interest to protect their gold reserves. x As a result of dear money, securities of all countries have fallen, entailing heavy losses in many quarters, and, what has been more gradually felt, the cost of commodities has risen, the extra charges incurred by the manufacturers and distributors being passed on to the consumers. Owing to the critical state of affairs in Europe Continental banks especially have shown an abnormally keen desire to strengthen their gold holdings, and this, of course, has led to a further hardening of prices. Yet in spite of rates ruling-higher than they have done at flny time since the American crisis of 1J)07, the banks have j failed to maintain their stocks of gold. The difficulties of the position become all the more apparent when it is seen that while suffering this loss of gold the banks have been compelled to make provision for the boom in trade. The fall in the percentage of reserves has been even greater than the decline in the actual gold holdings. If Sir Edward Holden's deductions and arguments are to bo accepted the outlook for the coming year is not particularly bright, even if we may count a settlement of the. European troubles among the bright linings to the political cloud (continues our contemporary). Austria in particular will be a source of diflicultv. Previous to the outbreak of hostilities in the Balkans Austrian trade had reached an unhealthy point of inflation, and, with the declaration of the Balkan moratoria, the Austrian merchants and their banker? found themselves in most embarrassing circumstances. Many Western merchants having been unwilling to give credit to the Balkan States, Austria had acted as middleman, and now her merchants are faced bv maturing bills, whilst their remittances from the East are stopped. This has reduced the countrv to such a grave financial condition that, had she been involved in hostilities, her Bank Act would have had to bo suspended, and eventually her whole monetary system would have been shattered. Last year she was confronted with an excess of imports over exports amounting to twenty-five or thirty millions above Wie normal figure, and this will entail a drain upon her stock of gold which will be felt throughout the world. Where the gold for the world's coming requirements is to be found is a question which no one is prepared to answer. The annual production of the precious metal is about one hundred millions, of which about thirty millions are used in the arts. It is estimated that India will absorb this year another thirty millions, and if last vear's operations are repeated America will retain practically the whole of its production of twenty millions, leaving only twenty millions to meet the increasing demands of the rest of tlie world. It may be that we have reached the crest of one of those regularly recurring waves of credit that mark commercial progress and that the following period of depression and contraction will effect an automatic adjustment. . Or it may be that the Indian absorption is the canker at the root of finances and must be checked to restore the normal

course of ' trade and commerce. Since | the establishment of the Indian currency upon a gold basis in 1893 the excess of Indian exports has increased enormously, and the settlement of the balance during the last three years alone has entailed the remittance of thirty-seven millions of gold to the country, very little of which has returned. The gold currency is advancing rapidly in favor in India, and there is every indication that it will cyntinue'to do so, enormous quantities of gold coins being hoarded instead of continuing in circulation. It is to be hoped that the forthcoming Commission, of whose appointment we have lately been informed, will get at the root of the prevalent trouble and be able to suggest some feasible means for its removal. Meanwhile New Zealandcrs will not want for reminders that the finances of all parts of the world are closely interwoven and that a financial difficulty experienced in one country must react in one form or another upon every other country.