MONEY FOR HEW ZEALAND.

Gisborne Times, Volume XXVII, Issue 2587, 23 August 1909, Page 2

MONEY FOR HEW ZEALAND.

BORRdWINGINi LONDON; - SIR JOSEPH WARD’S MISSION. ' ~— 7* - ‘ (From the Correspondent of the “New Zealand Herald.”) LONDON, July 9. The opinion amongst financial experts in London is that Sir Joseph Ward will certainly take advantage of his visit to the metropolis to raise a considerable sum of money for the Dominion Exchequer. Mr. A. J. Wilson, the editor of the “Investors’ Review” and -- a veteran critic of the financial methods of the Dominion, told mo the other day that ho was certain Sir Joseph Ward would raise money in London within a few weeks, and there was no doubt as to his success. Just now the market is favorable, but the Dominion will have to pay a little more for its money than it has been accustomed to pay of late. As a matter of .fact,-New Zealand has been raising a considerable sum in London this year in the form of shortdated Treasiiry bonds. On one occasion the sum of £600,000 was raised in this manner, and Mr. Wilson believes that the. whole amount raised privately in London this year already exceeds a million pounds. BAD FINANCIAL METHODS.

Talking of New Zealand finance generally, Mr. Wilson was very emphatic in his opinions. “You have one of the most beautiful countries in the world,” ho declared, “but you are mortgaging and mortgaging until the very air you. breathe is hardly your own. Sir Joseph Ward’s policy of piling up the, debt is certain to lead to embarrassment eventually. The best evidence of that is the financial stringency you have just experienced. Suppose, for example, that your crop and clip in a normal year aro valued at twenty million pounds ; we will just take that figure as an illustration. Now in a . bad season your prices for wool and hemp and mutton fall so that the season’s product is only worth fifteen millions. That cuts down the resources of your banks and your merchants and everybody else to that extent. The banks could not possibly give you credit to the same extent as if you had had a good season. But in spite of that you have the steady pull of 'your numerous debts, particularly the public debt, which is constantly drawing away money to meet the interest charges here. These two things together made the stringency more intense than it otherwise would have been. Sir Joseph Ward’s policy has got you into this fix, that if for any reason —such as a great political upheaval—the London money market should suddenly require to provide an enormous amount for the Home G-ovornment, and should, therefore, be unable to lend New Zealand any money, you could not pay the interest on your debt. That might very easily happen; in fact, there is danger ahead.”

TWO PROPOSALS CONDEMNED. I mentioned to Mr. Wilson two of the suggestions that were made with a view to obviating a possible recurrence of the financial stringency in the Dominion. Both lie regarded as utterly unsound. Neither dealt with the root of the difficulty. With regard to the suggestions that other banks should enter into business in New Zealand, Mr. Wilson said, of course, any bank that wished to enter the field and could give the necessary securities in the way of-capital, should not find anything in its way in going there. But at the same time he did not think any number of banks would make such a stringency less severe. The very fact that the stringency arose from falling prices and diminished crops shows that it was a natural result. It was not in any way the fault of the banks. No banks could give indefinite credit. PAPER CURRENCY. The suggestion that the Government should issue paper currency to make the market easier and money more readily available Mr. Wilson considered would be fatal. “What is it to be based on?” he asked “What would be the security? All the Government property is pledged already. That has been my standing quarrel not only with New Zealand but with other colonies. They are over mortgaged now, and consequently they have no real security to offer. It is like offering a second or third mortgage.” Has a paper issue ever had satisfactory results anywhere? “Unrestricted paper money has never been issued in England since the days of the Napoleonic wars, which brought this country.to the verge of ruin. Tor a few years specie payment was suspended by the Bank of England, and the experiment had to be resorted to. But ‘it was a disastrous one, and the paper was resumed at the earliest possible date. I think about 1819.” THE BANK RESERVES. In answer to further questions, Mr. Wilson said Ee did not know whether the financial position in England at the time li6 spoke of was any nether than in New Zealand to-day. The New Zealand hanks; judging by their balancesheets, kept a fair amount of cash in reserve, more by comparison than English .banks. ; In England the position had much improved in this respect during the last 10 or 20 years, but even now the reserves were too small. This disadvantage, however, was counterbalanced by the fact that England is a creditor country, whereas New Zealand is a debtor country. England had money lent out in vast sums; New Zealand owed laTge sums, and that made all the difference. England had only to sit still when times were bad and the money must come in, whereas New Zealand had to produce something to sell in order to meet her obligations abroad. But even wealth will not cure a monetary stringency. “Wo have it here,” continued Mr. Wilson. “Look at the pressure at the end of 1907 and the beginning of .1908, when the bank rate went up to eight per cent. 'There was no remedy for it. There was a tremendous demand for money. People found securities falling, and they had to provide more margin, and money was becoming very dear. These

.things .'.occur , and. nothing , can jpossilm ‘ly be; done to prevent them 7 No number of hanks, will make any difference. • v As-for the 'Dreadnought offer: “It is .'perfectly,, shameful,” said Mr.; Wilspn, “to talk of making arrangements to pay off the cost in one generation, New Zealand-never-haying paid off, a penny of her loans.” DUTY AND PRUDENCE. Mr. R. Logan, chairman of directors of the National Bank 6f New Zealand, vigorously denied, at the general meeting on-. Tuesday, the suggestion . that the banks had not dene their < duty in the .crisis. With regard to the statement that the banks had jieen over-cautious in restricting advances, he thought it was now admitted that they had advanced as much as could reasonably be expected, having regard to their resources.

Mr. A. M. Myers (Auckland) referred to the recent speech of Sir Joseph Ward, in which he seemed to infer that the banks had not been doing tbeir duty. The figures in the balance-sheet showed that the National Bank had lent to the people of New Zealand practically as much as it had. received on deposit. Personally he would disagree with anyone who thought they were justified in going further. Individually and collectively the banks trading in New Zealand had 1 done their duty. The people, moreover, were indebted to the banks for the prudent policy they had pursued in the present setback. They had been, inclined during the last few year’s to go ahead a little too fast. Care and prudence was necessary. We oould not expect the high prices to continue for ever, and this little setback woukl probably be a blessing in disguise.