THE MONETARY OUTLOOK

Daily Telegraph (Napier), Volume 58, Issue 205, 30 September 1929, Page 10

THE MONETARY OUTLOOK

AUTUMN DEMAND LOOM1NG. LAST YEAR'S EXPERIENOE. "Now that the London money market has more or less rid itself of its iialf-year-end preoccupations, it will be more disposed to cast its vision forward toward the traditionally difficult jieriod of the monetary year, tlie 'AuLumn crop-moving season,' wliich is now approacliing ominously near," tlie Einancial News wrote on July 18. "So far as present appearances go there is no relief in prospect from the persislent monetary strain upon the ster-iing-dollar exchange, and when the wheat and cotton crops come to be paid for that strain will, of course, be reinforced by tlie seasonal commercial demand for dollars. "In what sort of shape are we to meet tliat additional burden? In ierms of gokl we are some £17,000,000 to tbe bad as compared with a year ago. Tbe reserve of the issue department on July 11. 102S, was £171,608,000; last Tbursday's figure was £154,494,000. Last year tbe reserve went on rising tiil tbe middle of September, when it all but reaebed £174.000,000. At tbat point tbe Autumn efllux began, and bv ihe end of tbe year we bad lost a full £20.000,000, tbe return of Deceniber 26 registering the lioldmg at £153-78,3,000. Last week's reserve exceeded this figure by only £700,000. and we are therefore in the unfortunate position of starting the Autumn this year at the point at which we ended it last. "We may, indeed, still clierish tlie hope — though the hope must ho a slender one — that before Autumn comes we may have ndded to tlie present holding some £3,000.000 or £4.000,000 from tbe incoming Soutb African supplies. Ajiart from tbat, a £20,000,000 Autumn drain this year would mean a reserve down to £135,000,000 — several millions Jower tlian it has been since tlie return to the gold standard. One may say with eonsiderable confidenee tbat the reserve will not be allowed to fall to that level, but that ; Tompt bank rate action will be taken , on the recurrence of any such heavy efflux as occurred last montli. It may be tliat there is no particularly virtue in £150,000,000, but there is virtuo under tbe gold standard in maintaining Ihe gold reserve at a reasonable stable level, especially at a time like the present, when tlie sacrifice of even a substantial part of our holding, which some people advocate) would prohably have onlv a verv limited and temporarv effect on the dollar-sterling exchange. . .