THE MONEY MARKET.

Timaru Herald, Volume XIIIC, Issue 13728, 19 October 1908, Page 2

THE MONEY MARKET.

TIMARU BANKER INTERVIEWED. On the cut pet in the banker's parlour is a place where many people devoutly hope they may never get, bnt a "Herald" reporter, in tearch of information, found himself there on Saturday, and, unlike a good many others who go there froin a different cause, he got what he wanted. It wae to the office of the local manager of the Bank of Australasia that the newspaper man found his way, and in convei•satron with Mr Costello, he gleaned some interesting facts concerning what, to all, :j> of vital importance—the present position of the money market, as disc-lcted in the bank returns published on Saturday. At the outset Mr Costello »aid that there was no need for any scare, and that the present depression was only temporary. It was not a crisis, but merely a depression for the time being. It might last for eighteen months or two years, but at the expiry of this time he believed it would be found that things would right themselves. The tightness of the money market would ease off as soon as the receipts from the next wool sale were to hand. What has caused this sudden iever>iou from plenty to insufficiency! " As to that," said Mr Costello, "there have been a variety of reasons, one of the chief, in my opinion, being the drop in the price of wool. Another, is the absurdly high price to which land was run up, and a third reason is to be found in the cash-scatter policy which to many people wetv adopting as the result of a few exceptionally good seasons. While it is not pleasant for a bank to have to refuse to make advances, 1 think that the check will be .productive of a good deal of good. There has been too much gambling in land, too great a tendency to get advances against unsold produce, too much money spent in luxuries, such as motor cars, and too many trips to England. All this will receive a check as a result of the temporary depression, and to that extent the money shortage will do good. It i> really a blessing in disguise. One thing which bliould give cause for congratulation is the fact that it come before land values had run up'_as high as was the case at the time of the previous laud boom thirty years ago." As indicating the reckless way in which I many people had anticipated their in- [ comes, Mr Costello said that numbets of wool growers had secured advances up to 8d per lb ou the wool they eent Home last year, and now at the salif> it was only realising 5Jd and 6d per lb. To put the position in more concrete form, gome men had obtained £IO,OOO from the banks on their wool clips, while their actual returns only totalled £BOOO. This meant that the banks had so much more money locked up, and it prevented them from making advances which they might otherwise have .made. 'l'lie worst feature of these 'anticipated gains" was that the money advanced ou the strength of thiin had in most cases been spent, and all the banks could do would bo to deduct it from next year's receipts, unhea it was paid before then. In the meantime it w;* restricting the business operations of these to whom the money had been advanced, and it was also restricting the banks in their lending transactions. "If the bunks chiee to take advantage of the present, petition," Mr Costello went on to/say, "they could get much higher rates of interest than they are charging; but they do not want to do this. The banks want to deal fairly by the [>eople, and they aro refusing new business (no matter how tempting the rate of iutei<st offered) in order that they will have sufficient money to keep their regular customers going. What we want to do is to trade on a safe basis, and in working as we are, the banks are acting in the best interests of their clients, as well as of themselves. When it is remembered that the indebtedness of the ]>eople of this Dominion to the banks is £20,000,000, it iau be readily seen that there is need for a steadier policy. " Kouth Canterbury will not, in my opinion, suffer as much from the tightness of the money market as other parts of Xew Zealand, for the reason tiiat we grow i-o much grain here, and the price of this has kept up beyond a paying level. 'lh>effect of the stringency has not been feltVery much here, and I do not think fimaru will feel it severely, because it is a good business town, and there is such a large quantity of grain grown in the district, that this has to a huge extent counterbalanced the shrinkage in receipts ftom wool and lamb. In the Xoith Island the. position is very different, foi there they grow practically no grain ; wool, mutton and fiax have to a certain •-Xtent failed them, and they have only their dairying to fall baek uim.ii. Another reason why I think Timaru will not feel the set-back very much is that most of the laige traders here juy ca*h for tlieir good*, and consequently they do not require to lv accommodated by hd.V. V. rv few bills are given for goods heie. ■.mil pared with some other place. aud f eon aider Timaru i« a v< rv x.mid bii-in-"»s place." Speaking of the hank return*, Mr Costello said that the advances for the .June quarter of 1907 amounted to £20.559.857. while for the corresponding period of 1908 they totalled £23.791 892 -an incr.-a*e of £3.252,035. The fr>e depudts < winch bear no interest! for the Jun- quart-, r of 1907 amounted to £12.213.939. ami the fixed depu,lt, to £12.0-18.173, «h>.h to gather gave a grand total oi £2-1.262.112. In 1908 for the sann* j•- ri<•»l. the free de posits totalled £11.532,286. and the lix«-d deposits £11,226.402. or .» total of £22.756.688. TU-.- figure.. rhoutd a decrease of £1.505.*52-1 in fr--- and lit - 1 and that could not he fgarded .ifc at all satisfactory. Ii this d.-cr».i»c of £l..'»'.Vi.-»2»l were add-d to the ill. leave in the adr*r..;e» foi the Mine nod

(£3,232,035), it -would be seen that tlie buuLs were £4.700,000 .worse off than tliey were twelve months ago. Mr Ccstello mentioned a curious fact, tha* it is easier how to arrange an outside loan of, say. £IOOO 'or £ISOO, tliau one of a much larger amount at the name or even a higher rate of internet. As a rule the larger amount was obtainable at a lower rate of interest. The reason for this was, lie supposed, that, people of comparatively small means had a eertaiu amount of money on hand, while lhe biggn- people (financially) had their money all locked up. Another reason might be that eome people preferred to have their money "spread." Asked about the interest charges, Mr Costello said that- these varied from to 7 per cent., according to the nature of the loan. Good security could be got for mon.-v at 6 per cent. The main reason the banks had for putting up the rate of interest was not so much to get the increased interest, as to stop applications for loans. With regard to discounts, he said that it followed as a matter of course that' the?e must- increase when business wasalack. as traders could not readily get their money in, and had to give bills, whereas previously they were enabled' to pav cash. In conclusion, he said it should be" remembered that these comparisons were against a record year for deposits, and lie did not consider that there was anv need for alarm.