MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LVII, Issue 209, 4 August 1937, Page 4

MONEY AND BUSINESS AFFAIRS.

PROTECTING THE PUBLIC. (By “ELJ.K.”) In order to afford increased protection to the investing public, the Sydney Stock Exchange has inaugurated a fidelity fund, and the Exchange has been closely co-operating with the Government in the matter. The latest official organ of the Stock Exchange contain*! references to the Subject. _ It states that in no other organisation of the kind is more strict attention paid to the qualifications of members. No man can be admitted until his business capacity has been proved in the world of affairs, his financial standing shown to be sound, and his personal integrity established beyond question. Even then, it is recognised that circumstances have exerted an abnormal influence, and the Stock Exchange has now taken snecial protective mea-' wires to prevent difficulties arising. “This year,”''fhe official organ states, “further additions were made to the constitution of the Sydney Stock Exchange, in pursuance of the policy of building up a sense of social responsibility that will find expression _ in stronger safeguards. The committee, whenever in their opinion such action appears warranted, may investigate the accounts and affairs of any member of the Exchange, and report the result of such investigation to a special general meeting of members. The member whose accounts and affairs are being investigated must produce _ all books, documents, and supply all information in his possession necessary to the investigation. The committee of the Exchange has complete disciplinary powers in the event of any violation of the rules being disclosed.”

It may be stated that the New Zealand Stock Exchanges are fortified with the same stringent rule, and so far the New Zealand brokers have conducted their .affairs ably and well. The New Zealand exchanges do a relatively small business, which is conducted, with due regard for the interests of clients. CENTRAL BANKING. A Royal Commission has been investigating banking in Australia and its report on central banking is very interesting. The objective, it is pointed out, is the best use of productive resources, the fullest employment of the people and resources under conditions providing the highest standard of living, and the reduction of fluctuations in general economic activity. It is recommended that the central hank should be the Commonwealth Bank, organised mainly in the form in which it exists at present. It should bo publicly owned and controlled. That a central bank should not make profits is not accepted by the commission; but. though it. should pay little regard to the considerations or profit, it should be in such a position that profits will normally■ arise from its activities. The members of the board should be chosou not only for their wide financial knowledge, proved capacity and determination, but also for their breadth of outlook, and for those qualities which make it likely that they will obtain the co-operation of other institutions, and of Governments, in their task of administering the central bank. The commission appears to lay great stress on the need for a strong board, and the qualifications set out above are a requisite of the first importance. But the problem is as to the capacity of the person or persons appointing the members. As the central bank is to be publicly owned the appointments must necessarily be made by Cabinet. Generally a Cabinet consists of a number of men without any more distinguishing characteristics than the average man on the street. And it is.always difficult to eliminate the political element from such appointments. This is one of the strongest objections to a politically controlled central bank. The most powerful central bank in the world, and tho most efficiently managed, is the Bank of England, and this institution is entirely privately owned. The British Government has no share interest in. the bank, and yet it performs most efficiently all the functions of a State bank. The directors work in close collaboration with the British Treasury. And the bank seeks to run its business profitably, and does so. for the last dividend of the Bank of England *tvas at the rate of 12 per cent. Any business organisation publicly controlled and subject to competition is almost invariably unprofitable. The Post Office would.no doubt occur to many as an exception, but that is not the case. Tlie Post Office holds a monopoly. It costs a penny to send a letter from one street to another in this city through the Post Office, and it costs no more to send a letter in the ordinary way from here to London. The Post Office cannot be operated except as a monopoly, and be-

cause of that we readily acquiesce in its being controlled publicly. But a bank is quite another affair, and because of the wide and special knowledge required for controlling it, can it be run efficiently as a department of the State when banking and politics uo not generally mix? The commission goes on to say that the chief Consideration of tho central bank should be the reduction of fluctuations in tho general economic activity in Australia, thereby maintaining such stability of internal conditions as is consistent with the change which is necessary if economic progress is to take place. The fluctuations referred to are apparently in respect of the price level of commodities, but stability of the price level, while .it is the constant dream of economists, is beyond man’s control. There are so many factors that disturb the balance, such as crop movements, inventions, fashion changes, State interference, and these factors are constantly operating to upset the equilibrium. It is, however, fashionable for experts to express a thesis which would be perfect in a perfect world.