SHARES & MINING

Observer, Volume XXXVI, Issue 6, 16 October 1915, Page 20

SHARES & MINING

[By Btjllionist.]

THE banking returns for the September quarter were made available last week, and, as they show the position of the Dominion after fourteen months ot war, they are of considerable interest The returns show that New Zealand has not suffered financially On the contrary, we have made money to a greater extent _ than usual, the idle credit amounting to a very large sum.

The free deposits, or the balances at credit in the current accounts, show an increase, as compared with last year, of the huge, sum of £3,373,086, while the fixed deposits increased by £780,179. Besides this excellent showing, the advances have decreased by £726,354, and the discounts by £387,316, so that on the twelve months' comparison we are better off by £5,266,935. * * * As further evidence of the changed economic conditions, we have the increase in the circulation, which amounts to the substantial sum of £810,240. A part of this increase is no doubt due to the withdrawal of gold from circulation', but a large proportion of the increase is due to the greater spending power of the people. The prices of commodities; are so much higher that more mone| : is needed' to meet the everyday expenses. Expanding circulation is usually a sign ...of good times and 1 healthy trade,' but it would be a delusion, to assign this as the sole reason for the increased circulation. * .* .* The note circulation is a bank liability, and although notes are now legal tender, making it unnecessary to hold the normal amount of gold against the circulation, the banks are not taking any risks on the matter. The coin and bullion has increased 1 in a greater volume thau the note circulation. The increase in the metal reserve for the twelve months is £1,179,414, while the increase in the circulation is £810,240. * * *

The' banking position is very sound, but the economic conditions generally are more or less artificial. As, soon as transport facilities are available, merchants will be obliged to import freely to replenish their stocks, and prices of commodities may be higher even than they are now. For this reason, a very large proportion of the idle credit must be so held to meet this situation as soon as it arises.

But;'as it seems likely that the war will- be continued for another six or nine months, we are assured of high prices for our produce for the current season, and evidence of this is already forthcoming in the excellent prices offered for our butter and cheese, frozen meat and wool. If we realise within 25 per cent, of the high prices of the last season there will be a further accumulation of savings.

With this superabundance of .idle credit, the rates for money should be very low, but this is just what is not the case. Money is tending upwards, and rates 1 promise to be distinctly higher than they are now. The Government's two million loan, if fully taken up, will sweep up a fair amount of the loanable credits, but the Government proposes going a bit further by using the Post Office Savings Bank's money.

The latest proposal is to secure fixed dleposits for not less than twelve months, in amounts of not less than £50, and the interest is to

be 4£ per cent, or 5 per cent. If either of these rates are paid, it will mean raising the price of money, because the banks, to protect themselves, must offer higher rates. The small depositors in the Post Office Savings Bank will be unable and also unwilling to take advantage of this offer, and the deposits must therefore come from the class that usually place their funds at interest with the banks. * * • If the deposit rates are high, the lending rates must necessarily be high. There is, of course, the possibility that, owing to the excellent export trade that we are doing just now we will be able to spare the additional money without causing any disturbance to banking finance. The whole point is whether the Government is acting wisely in borrowing to the limit for public works. In all countries there is a tendency to hold up public works until the war is over.

Nearly all the Governments of Australasia are determined to continue public works on the same old extravagant scale, provided the money can be obtained. The Australian State Governments have been inquiring in London as to the prospects,' and have met with a rebuff, and, while it is possible to raise money in the Unitedl States, the terms demanded; are excessive. * * * The annual report of Hancock and Company (New Zealand) shows, says the "Financial.. Times," that the prosperity of the brewing industry in the Dominion has been very satisfactorily maintained during the past trying year. The gross profit is £33,000*, as against £36,000, and after meeting administration expenses debenture interest, and providing. fory>depreciation on much the as previously there is a net profit' of £15,800 as. compared with £18*000. The ordinary dividend last time was raised from 7 to 10 per cent, and tbat rate is how maintained, while £8,500 goes forward, as against £9,100 brought into the accounts. There is no transfer of £5,000 to general reserve, as was the case twelve months ago, but in lieu of this the balance of the goodwill item —£4,400 —is extinguished. Having ■regard to all the circumstances, the chairman at tlie recent meeting was thoroughly justified in claiming that the company had achieved a very creditable record.

The successful flotation of the An-glo-French loan in the United States will bring much needed relief to the foreign exchanges. The millionaires subscribed handsomely to the loan, and; the German Jews, in spite of the vast amount of rumours, were liberal subscribers. The issue was too attractive to allow sentiment to interfere. The total amount raised appears to be about £I20,000 ; 000, and it would occasion no surprise if the Bank of England is now in a position to withdraw gold from America.

Owing to the necessity of makii:g heavy purchases of munitions in the United States, gold has been flowing in that direction to an unprecedented extent, and, according to the report of the Secretary of the Treasury at Washington, gold coin and bullion in the United States on July 1, amounted to £398,700,000. No gold coins are being struck at present at any of the U.S. mints, except souvenir. pieces to commemorate the Panama Exposition, as the amount of gold specie and bullion stored in the vaults of the Treasury far exceeds the minimum quantity which the law requires should be kept by the Government.

There has been going on a great gamble on the New York Stock Exchange, one of those 'periodical spasms that appear to affect Wall Street. There is a finance boom in America, and the money magnates must have their little flutter. There will, of course, come tlie collapse, and with it will vanish all hope of financial supremacy.

NEW ZEALAND GOVERNMENT £4 10s. PER CENT. DEBENTURES.

Isue of 4£ per cent. Bearer Debentures, under the authority of "The Finance Act, 1915," and pursuant to "The New Zealand Loans Act, 1908," as amended by "The New Zealand Loans Amendment Act, 1915:" to providle moneys for local expenditure DURING THE WAR

PRICE OF ISSUE FIXED AT £100 PER CENT.

The Government of New Zealand desires to place before the public of the Dominion this prospectus, showing the terms and conditions under which moneys may be invested on the security of the Public Revenues of New Zealand, to provide the funds necessary for local purposes during the present war. In view of the financial strain at present imposed on the Imperial Treasury in providing moneys for carrying on the war, the Government of this country confidently asks all New Zealanders who can afford to do so to assist the Empire by investing freely in these Debentures, and thus in a measure relieve the Mother Country of the burden of liaving to provide the capital required for local purposes in New Zealand. Forms of application may be obtained from any Postal Money-order Office, or from the Treasury. Applications may be lodged at any Postal Money-order Office, at the Treaslury, Wellington, or at any Bank or Registered Sharebroker's office in the Dominion. Applications may be made for £5 or any multiple of £5, and for a currency of 5, 10, 15, 20, or 25 years, at the option of the subscriber, ... : Subscribers who apply at a Postal Money-order office may lodge amounts by cheque or in cash. If cheques' are forwarded exchange must be added where payable. In cases where application is posted direct to Welington the lodgments must be first paid in to the "Public Account at any branch of the Bank of New Zealand," and the bank receipt must in such case be forwarded to Wellington with the application. Applications for sums not exceeding £5,000 must be accompanied by the total subscription or Bank receipt for the amount, and applications for .sums in excess: of £5,000 must be accompanied by a deposit of 10 perecent., balance payable on allotment. Allotments will be made by the Controller and) Auditor-Gene-ral. In the case of default in payment of the balance the deposit previously paid will be liable to forfeiture. If no allotment is made the deposit will be returned. . Interim receipts will be issued on lodgment, and will be subsequently exchanged for Debentures. The Debentures will be issued with interest coupons attached. Interest will be payable halfyearly on presentation of coupons at a Postal Money-order Office, or at the Bank of New Zealand, or at the Treasury. Interest will be computed from the 15th October, 1915, and will be free from income tax. An annual Sinking Fund is established to provide for the redemption of the Debentures.

The Debentures will be issued in denominations of £5, £25, £50, £100, £500, £1,000. or in such higher denominations as) may be agreed! upon with the Treasury, and will be made payable to bearer. Debenturese will be repayable at par at

the Treasury, Wellington, or at any office of the Bank of New Zealand in the Dominion on their due date. Banks and Registered Sharebrokers will be allowed a commission of 5s per £100 on allotments made in respect of applications received from them direct, and which bear their stamp, and are forwarded to the Treasury or to the Post-offices under cover of the form provided. Coverforms are obtainable from the Post-offices. Commission will be paid afte rallotment, and will not be allowed on conversions or on transfer of moneys now on deposit with the Post-office Savings Bank.. The Debentures are Government securities in which Trustees are authorised to invest Trust Fhinds. Applications will close at the Treasury on 6th November, 1915, but the Government reserves the right to close at a prior date or to extend the period l at its option. In case of over-subscription, the Government reserves the right to decline any aplication, in whole or in part, as it may determine. Interest will not be paid in respect of any amor.nts forwarded with applications which are declined. CONVERSIONS. Holders of Government Debentures issued under the New Zealand Loans Act audi maturing on or before the Ist December, 1916, will have the option of converting into 4£ per cent. 1915 Debenturees at par if application is made to the Treasury on or before the 30th November, 1915 The interest under the new Debenture will take effect after the coupon for the then current half-year under the old debenture has been paid. POST-OFFICE SAVINGS BANK DEPOSITS.

Persons who now have money deposited in the Post-office Savings Bank may purchase 4£ per cent. Debentures by means of transfer. They must apply on or before the 6th November, 1915, to the Postmaster in charge at any Postal Money-order Office within the district in which their account is open in order that the requisite transfer may be made. Interest at per cent, under the new Debentures will date from the 15tb October, 1915. The forms of application and transfer may be obtained at the Post-offices.