Finance

More Bankers' Views on the Situation

N.P.B. MEETING.

WITH the meetings held last week , of the National Provincial and Lloyds, this year's series of Bank Meetings have come to a close. I think that, if possible, even more interest than . usual has been taken this year in the Bank Meetings, and `I would like, after dealing in particular with the speeches of Mr. Colin Campbell and Mr. Beaumont Pease at the meetings of National Provincial and Lloyds respectively, to attempt to sum up very briefly the verdict pronounced by the bankers upon financial and economic conditions, and their views with regard to the future. - And in dealing with the addresses, both of Mr. Campbell and Mr. Peaie, I want to touch upon those points which were either not dealt with at all or were not dealt with so fully in addresses by previous speakers. _ In confirming what had been said by preirlOns ,bankers concerning industrial progress during the past year, Mr. Colin Campbell, in his address to shareholders of the National Provincial Bank, laid, as I think, a very wise emphasis upon the part-played in this 'progress by the high, level of public - confidence. It • *BS displayed in striking measure in the loyal eelehrations of King George's Silver Jubilee early in the 'year and; indeed, throughout the period following upon the -crisis of 1981 confidence in the national finances and in the soundness of the country's banking system has been a powerful aid to the recovery in commercial and financial activities.

DANGERS OF CHEAP MONEY.

There were two points, however, dealt with by Mr. Campbell which, I think, call for special attention. While fully recognising the advantages arising out of cheap money, and especially the advantages to the Government in carrying through profitable conversion schemes, (Continued on page 230.)

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(Continued from page 228.) Mr. Campbell suggested that there might be another side to the picture, a side concerned very nearly with depositors and investors, who may be said to have suffered-from the continued lowering of interest rates. Mr. Campbell pointed out that a reduction of income from such sources not only restricts spending power, but forces many investors to the purchase of annuities, which is proved by the returns of the insurance companies. Indeed, I am not at all sure that this abnormal cheapness of money, and the poor income obtainable from Trustee securities, may not ultimately have an injurious effect upon the nation in many ways. There is a danger of our getting to the point when thrift may be discouraged and when the employment of capital in new ventures and new enterprises will he severely checked. I believe this to be the more likely by reason of the fact that the cheap money policy in many parts of the world may lead to high prices and a rise in the cost of living, which, while disturbing to all sections of the community, must be especially injurious to those who of necessity have to live on fixed incomes. Indeed, I am not sure that the national Exchequer itself might not suffer in time through those who have retired with comparatively small savings, having either, as suggested by Mr. Campbell, to purchase annuities or actually to live on their capital.

L1F.NDING ABROAD.

There was another very practical point touched upon by Mr. Campbell. It has been common ground amongst all the bankers at the recent meetings that we cannot expect to get a full relief of unemployment in this country, and indeed in some other countries, until there is a real revival in international trade. We know, of course, that the impediments in the way of such revival are numerous, including, as they do, that spirit of economic nationalism to which I have so frequently referred and out of which have come all kinds of barriers to free trade, in the shape of tariffs, quotas and exchange restrictions ; the net results are chaos in the exchanges and severe restriction of the exchange of goods and services between the nations. There is, however, another possible cause of restriction of our exports to which Mr. Campbell referred—namely, the fact that we are no longer free lenders to foreign countries. We know that in the pre-War days no small part of our trade activity could be traced directly to our loans to countries overseas. --These loans have now come to a standstill. In the first place, for some years we were not in the position to make foreign loans while, in the second place, many of our foreign debtors have been so hard hit by the fall in prices of their exportable commodities and goods as to be unable to maintain payments of their debts. Conse- quently, there are probably few foreign countries who if they had been permitted to borrow here, would have found a response from the investor. For some years now however there has been an actual ban on foreign loans, and it was to this ban that Mr. Campbell referred. He would, of course, be the first to recognise that the time has not yet arrived for resuming our old activity. But with the recent rise in commodity prices, the credit of some countries that were at one time regular borrowers for legitimate purposes of development has been improved. Issuing Houses and investors, he said, " may be relied on after the losses in recent years to be extremely cautious in the matter of offering or subscribing for foreign loans, and it will be unfortunate if the possibility of improve- ment in international trade is frustrated by a desire to prevent the outward movement of capital when trust- worthy borrowers are in a position to ask for it in the London market."

I have drawn attention to these two points made by Mr. Colin Campbell because they deal with practical and important matters; and in referring to them Mr. Campbell was performing a public duty. It is sometimes said by -banking critics that bankers are only concerned with their own particular routine of domestic banking and profit- earning. Mr. Campbell, however, was dealing with matters which affect the nation as a whole.

Lloyds Bank Meeting

INTERNATIONAL TRADE.

NOR was Mr. Beaumont Pease, in his address to share- holders of Lloyds Bank, less forceful in touching upon subjects of supreme interest from the national point of view. Indeed, Mr. Pease devoted no small part of his speech to considerations of international trade. He gave all due recognition to the more cheerful aspects of the subject, mentioning, for example, that in the export trade, of the six countries which showed an increase last year compared with 1934, we headed the list. While, however,• recognising that this was a matter for comparative congratulation and encouragement, he affirmed that it was not one for complacency or content- ment if only in view of the still large number of unem- ployed, and the well recognised obstacles to that greater volume of international trade which alone can effect a wholesale improvement. The flow of goods from one country to another is still impeded by the number of restrictions now in existence, and although the point is mine and not one emphasised by Mr. Pease, I cannot help thinking that so long as the leading creditor country (the United, States) continues to reject the doctrine of a free exchange of goods and services, there must be a continuance of chaos in the exchanges and a great restriction of international trade. For although a great creditor country, America still imposes obstacles to the debtor countries meeting their obligations in goods and services, and by so doing, and demanding gold, she has placed, and still places, such an impossible task upon the world as to make anything like a trade equilibrium impossible and also makes it impossible for gold to function as the basis for international settlements.

A PARADOXICAL WORLD.

Summing up the many difficulties which beset the path of those who would desire to bring about improved conditions, Mr. Beaumont Pease, in phrases which could not be improved upon, said :

"It is indeed a paradoxical world we live in. We agree on all sides what are the obstacles in the path of improvement, and yet by some inexorable fate we appear compelled to add to their number. We seek abundance, and in our search we find poverty. We strive passionately for peace, and in our efforts come dangerously

(etnitittutd-en page- 232,)

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(Continued from page 230.) near to war, just as a beginner on a bicycle finds-himself irresistibly- attracted towards the very object he wishes to avoid. We chant in the Ottawa choir the praise of monetary stability, and proclaim our belief ' that the ultimate aim of monetary policy should be the restoration of a satisfactory international standard,' only to bo answered by the anti-phonal response that the time is not yet. I hesitate to enter into a discussion on this last highly complex question, but in the belief that it is one ofe-importance and can only be solved by unremitting study, we have through tho year opened the pages of OW Monthly Review to a number of articles by exports of different nationalities. The ivhde-series has been published in a single volume, and I believe has served a useful purpose. " Surely our twentielh-eentury civilisation cannot be so helpless that it is out of its power somehow to obtain what is the common desire of all nations and peoples ! Even though success hai so far eluded our grasp and has moved one of our imaginative authors to write an ' Anatomy of Frustration,' we may surely believe that wholehearted co-operation for a common aim must eventually be crownedWith success."

DUTIES OF THE BANKER.

The danger has passed, for the moment, of -anything in the character of the nationalisation of the banks, but there is still—possibly always will be—such a mis- apprehension of the functions of the banker that it is not surprising the Chairman of Lloyds Bank should once again have laid down certain principles which must always guide the prudent banker in the conduct of his business. Having reaffirmed his opinion that the first duty of the banker was the safe custody of the depositors' money, Mr. Pease recognised that the next duty was to do all that is possible by way of giving financial assist- ance and advice to its customers. This, of course, so far as a mere phrase goes, also expresses the views of banking critics, only the latter are so often disposed to assert that this assistance to customers can be given irrespective of the banker's primary duty to the deposi- tors ; in other words, in defiance of the principles of • sound banking. At the present moment, for example, when bankers' deposits are standing at a high record level, there are some who seem to think that bankers -are; as it -were,laaarding money which should be used for banking loans. The trouble, however, of course, is that at the moment there seems to be insufficient confidence and indufficiefit trade to enable the banks to make the advances to the extent they would desire. We cannot, `said Mr-.-Beaumont Pease, " go out into the highways and hedges and compel reluctant borrowers to come in and demand loans," and he added : " There are many who think it is the capacity of bankers to extend credit indefinitely and control not only the volume but also to dictate the direction of credit and assume an omnipotent knowledge as to, what type of loan is -in Ilia national interest and what ought to be withheld on the grounds that it is anti-social." These, he said, " are distinctions on which different individuals, whether they are ,poli- ticians, bankers -or industrialists, take different views, and it would be mere presumption on the part of bankers to try and dictate on these matters."

ASSISTANCE TO INDUSTRY, -Towards the end of his address Mr. Beaumont Pease referred to the first Report of the Commissioner for the Special Areas in which it was asserted . that " managers of local branches of the banks are no longer as ready as they were formerly to advance capital on prospects and personalities unsupported by tangible assets." This statement, said Mr. Pease, is followed by the somewhat contradictory assertion that " it seems doubtful whether any organisation run on a purely commercial basis can -meet- the needs of the Depressed Areas." This same Report 'of the Commissioner for the Special Areas gave the hint that if there is a demand for financial assistance and " if it is found that there is a real opening for new enterprise in the Areas " he may " find it necessary to -advise that a special fund should be created for the purpose." I am sure, said Mr. Pease, the banks will be- sympathetically anxious to take part in any scheme which legitimately falls within their scope. It must be borne in mind, he added, " that the Commissioner anticipates that a number of failures must be expected " and that no " organisation run on a purely commercial basis can meet the needs of the Areas." Presumably, therefore, any assistance which the banks could give to such a scheme would be only of an indirect character. Any proposal, on the other hand, Mr. Pease said, " coming to a bank which, interpreted on the most liberal lines, could be classed'asa commercial venture in those Areas, will obtain the most sympathetic consideration."

A Summing Up

THE OUTLOOK.

SUMMING up the general character of this year's annual meetings of the Banks and the conclusions reached by the different bankers, I think it would be true to say that while there was general agreement with regard to the progress made by our Home Trade during the last 21 years, there was almost equal agreement with regard - to- the likelihood of such improvement ultimately receiving a check if there were to be no improvemeni in the international outlook, both as regards politics and trade. Therefore, it is, perhaps, scarcely surprising that so far as the general outlook is concerned, the statements by our leading bankers do not us very far in the consideration of future prospects. Nor, perhaps, is this surprising, with that outlook so closely intertwined with international politics, that bankers would naturally be slow to refer to them.

CAUSES OF ANXIETY.

Nevertheless, I suggest that when it is recalled how much attention was given . by each hanker to the conditions 'restraining international trade, there may well be good reason for regarding the outlook, not only with uncertainty, (Continued on paje 234.)

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(Continued from page 232.)

but with some anxiety too. At the moment, anxiety may centre- upon such immediate matters as the wisdom or otherwise of imposing oil-sanctions upon Italy or upon the future attitude of the League of Nations towards the Italo-Abyssinian War, but anxiety, unfortunately, extends over a much wider area. As Mr. Beaumont "Pease so shrewdly said in the course of his speech when referring to the paradoxical world in which we are now living : " We strive passionately for peace and in our efforts come dangerously near to war. ' How far this unsatisfactory state of things must be attributed to the fear which seems to beset all nations, or how far it is due to an actual spirit of aggress-ion on the part of some nations, it is impossible to say, but one thing, at least, seems certain, that the present tense atmosphere in Europe cannot be prolonged indefinitely without some kind of catastrophe.

Possibly by reason of the immediate necessities of the case, the League of Nations seems called upon at the moment to bring pressure to bear upon a particular nation with a view to shortening an actual conflict. That this conflict may speedily end must be the desire of every right-thinking person, but over and above this particular crisis is the desire that there should be a growing feeling of goodwill and confidence amongst all the nations. And I cannot help thinking that there is room, or should be room, in the future for statesmen, politicians and economists alike to conduct a propaganda, not of prohibitions against international conflicts, but of one designed to show what can be .accomplished by it gospel of." give and take " and international co-operation, which by its assurance of international peace, shall, at the same time, ensure the maximum amount of confidence and prosperity to each individual nation.

ARTHUR W. KIDDY.