National economy, alike to private thrift, is necessary in a healthy business life. Although not always interchangeable in their application, the maxims for private guidance in business, are largely those that pilot the national undertaking and financing. But the methods of enforcing habits of economy and thrift necessarily differ. The good that flows to the country through the present “tight money" influence—is for national economy and consequent private resourcefulness. This article is written in the language of the street for the everyday business man, and will be easily understood and appreciated.
SIR WILLIAM MACKENZIE when he returned from his recent trip to Europe, stated to the writer that it was not necessary for him to visit London in order to get the necessary money with which to carry on the work of developing the transcontinental project the Canadian Northern Railway has in hand. His visits to London were for the purpose of visiting the agents who look after the business of the company there. Already the Canadian Northern has built up for itself a connection in the money markets of Europe that ensures for it necessary funds. There are times, of course, when it is necessary to make the demands as light as possible, and in view of existing conditions it may be that the output of Canadian Northern loans during the present summer will not be as large as anticipated. But the fact stands out, despite tight money conditions, that Canadian railroad enterprises still maintain the confidence of British investors.
Only a few weeks ago it was announced^ not officially but with official acquiescense, that the Canadian Pacific Railway had placed a large issue of four per cent, debentures at par. Likewise the Grand Trunk placed a large loan, on terms not quite as favorable. Other large loans have been placed by Canad-
ian public and private corporations all of which have been taken up. Some have been more popular than others with the investing public of the United Kingdom but in each case the money has been provided. In the aggregate the borrowings of Canada this year to date will exceed those of last year for the corresponding period. With this supply of money forthcoming the outlook for the Dominion cannot be regarded as otherwise than encouraging. Two months ago it was pointed out that the chances of Canada in the money markets of the world were favorable and events have fully justified the claims made at that time.
Meanwhile money has been somewhat stringent in Canada though as yet no serious effects are apparent. The domestic situation is still unsettled and will not derive any immediate relief from the heavy borrowings abroad. It will take some time to adjust business conditions in Canada to the elimination to so large an extent of speculative business especially in real estate. That elimination has, however, already produced a tendency to economize that will have very beneficial effects all over the Dominion. It is from this point of view that business men generally may profitably look into conditions at the present moment.
There are successful manufacturers in the Dominion who know very little more of finances than what is told them by the banker with whom they do business. The attention of the type of man in mind is centered upon his own affairs, and does not incline to the intricacies of world-finance and their relation to trade and commerce in an international sense. If his banker tells him to go slow he obeys and if the banker tells him money is tight he is more careful of his credits. Usually it is good policy to follow the advice of bankers, but a very large number of successful men have made money by ignoring the warnings of the men who have extended credit to them. On the other hand, many men who have not followed the advice of their bankers have come to grief. In the case of the man about whom we are to talk for awhile he was one who believed in his banker; his business was a success, or rather, is a success and will likely be so no matter What money, conditions happen to be. If the writer was asked why this man’s business wás a success, and was likely to ^continue to be so the answer would be that he was thoroughly practical, the blaster of his craft and in the conduct of his business stopped all leakages in thé form of waste and negligence and he limited his business to the proportions of his capital. To familiarize himself at first hand with the details of his business in Western Canada he personally visited his agencies and looked into conditions in the localities in which they were situated. He had reason to do so because collections were not as good as they should be. After covering much territory and seeing many people he felt that there must be something wrong. Was it true, as had been suggested to his mind so often that there was a money trust in the Dominion? What had become of all the money ? Where had all the money paid to the grain growers for the half billion bushels of grain they had grown gone to? There must be something wrong somewhere, he thought. These questions were uppermost in his mind when he got back to his office and found his plant running as smoothly as when he
left it, and the orders on hand were as large as ever, but the goods he had delivered were not being paid for as well as usual.
WHERE HAS THE MONEY GONE.
As to where all the money has gone, is a problem that has been worrying many people recently. If you ask a farmer he will tell you that although his crop was a good one last year, it cost a lot of money to gather it and the price he got for it was not so high as in the previous year. He had also to contend against bad weather conditions. The result was that he did not get from his crop sufficient to cover his normal obligations. The laborer, the thresher and the binder twine man got his money. Implement men, storekeepers and others have had to wait and in many cases are still waiting. But he has his farm and other assets on which it is held he should be able to borrow money from the banks with which to pay his most pressing obligations. Yes, he has assets. Speaking of farmers as a whole, it would appear that they have pledged their assets heavily. Sir Edmund Walker, the president of the Canadian Bank of Commerce, and Mr. Edson L. Pease, the general manager of the Royal Bank, told the Banking and Commerce Committee of the Canadian parliament of the vast sums they had loaned to the farmers. This money was not found by the West but was taken from the deposits of the banks located elsewhere and loaned in the West. In the opinion of the banks as much money has been loaned to the farmers as is deemed safe at the present time. Hence in some cases those with valuable tractors have not been able to get credit to the extent of providing gasoline to operate them. This is a serious condition. All farmers are, however, not in the position of not being able to buy a few dollars’ worth of gasoline to operate a $3,000 tractor. They are, however, as a whole, in the West, fairly hard up. They have no loose money and they do not know where to get it. Where has it gone?
At the present time if the farmers’ affairs, speaking of them as a whole,
were in good shape they would not be able to borrow money except in small amounts and then only for strictly agricultural purposes. Banks have little to lend. They have the actual money but so great is the demand for it that they have to keep it in liquid form so as to be prepared to hand it back on demand and on short notice to the people who have deposited it with them. If a dollar is placed in the savings bank its manager has to be prepared to hand back that dollar on the usual notice being given and in the case of demand deposits banks have to be prepared to hand back the money whenever the demand for it is made. In times when conditions are unsettled, when there is war or political disturbances, depositors and investors become uneasy and want their money where they can get it quickly. Banks therefore have to be prepared to meet the demands of their depositors.
1 At the present time conditions are unsettled and the cause of there being so ■is to be found in the fear of war arising out of the Balkan troubles, as well as in the huge demand for money from practically every progressive country. ‘The banks lend money that is furnished them by depositors. They have a certain amount of their own but it is only about ten per cent, of the amount of the money deposited with them. Strictly speaking the large banks of to-day are merely the agents through which the money of the people is loaned to the people. They are responsible for the care of the money entrusted to them. If they find the people unconcerned about their deposits in the banks and are not using them the money will be available for borrowers. But everybody wants money at the present time and the banks have to be on the alert lest they.should have to meet a.demand on them for the money they hold as trustees. They are, therefore, taking precautions to keep up their reserves of cash and to do so means lending very cautiously. Money is, indeed, tight. But every class of borrower, other than the farmers, is finding difficulty in getting loans which in normal times would be granted to them. In consequence every class will have to make the best
of what they have—in other words, economy is the order of the day.
CANADA'S HUGE BORROWINGS
How isit then that Canada is short of ready cash after so many years of increasing crop and industrial production? To answer this question let us ask another. How much borrowed money has been invested in Canada? Sir George Paish, the editor of one of London’s leading financial journals, says that approximately £400,000,000 has been borrowed by Canada. At the present time Canada is borrowing at a rate unprecedented. It is not the desire of the writer to create the impress sion that there has been unnecessary borrowing or wasteful borrowing, but he desires to draw attention to the fact that for every dollar loaned to Canada a debt has been created. In the aggregate a large debt has been created and the obligations incident thereto have to be taken care of. At the same time other countries have been incurring large debts. Brazil and other South American states have been borrowing largely for development purposes in the same way as Canada has been doing and in the countries of the south-east of Europe huge debts have been created for war purposes. This accumulation of debt has created a shortage of the wherewithal to pay the debts. When individuals get into debt they have to economize to get rid of it; so it is with nations. In countries where active development is taking place borrowed money is being invested at an unprecedented rate and in .the older counties active business is absorbing much new capital and elsewhere capital is being wasted by war. This is where the money is going, and has gone to. If the farmer builds a new barn with borrowed money he has to work hard and economize to pay for it. Likewise, if the manufacturer builds a new factory he has to economize and work hard to pay for it. National extravagance facilitated by borrowing can only be met by national economy. The world to-day has incurred more debt than it can comfortably take care of hence a shortage of money.
As a result there is a tendency to economize and it one of the best indications in the business situation of the moment.
In a communication to the writer a Montreal house strikingly illùstrates the tendency at the present time on the part of the public to dispense with some luxuries and hew closer to the line of economy. To quote from the communication referred to: “Tight money appears to have affected a reduction in the number of cigars being manufactured, owing largely, we believe, to many firms having withdrawn their Western travellers, as the report that for goods previously sold renewals in full are being asked in the West and it therefore does not pay to enlarge their credit. At the same time they report that everybody seems eager to purchase there, but always on time.”
The above simply means that instead of the cigar business increasing from ten to twenty-five per cent., it has in the last month or six weeks shown no increase taking an equal number of customers over the same period of last year. Tobacco and other luxuries have also shown a decrease.
“General lines, however, such as chocolates, extracts, etc., have still
shown an increase but in greatly lessened volume.
“Collections are still slow, especially with wealthy firms.
“To sum up, general necessities seem to be pretty staple while luxuries seem to have been cut off. The position during the last ten days seems to show slight indications of recovery.”
ECONOMY A GOOD SIGN.
The above was written on May 7th and represents the tenor of a large number of communications that came into the hands of the writer. It would appear that the country had set itself to work to economize. Necessity may be responsible. But a few months of economy on a national scale has marvellous effects. Though acting under compulsion it will be a salutary exercise for Canadians to deprive themselves of some of the luxuries they have been accustomed to by a period of great prosperity and development. Limitation of capital will ensure more economical use of that already employed and for some time at least, that to be employed. The results of such economy can only have one result—the accumulation of more wealth in proportion to the debt incurred with easier money as the result.
FREEING FIVE HUNDRED SONGBIRDS
On a farm near Detroit a wonderful thing happened recently, says Mr. Sanders, late of the U. S. Tariff Commission and editor of the Breeders’ Gazette. A perfect spring day had just dawned. It was four o’clock. The sweet voices of the early morning bespoke the awakening life of the northern country-side. There was a faint rustle of breeze and a perfume of budding things. Henry Ford, a farmer, automobile manufacturer and friend of birds who campaigned so effectively for the McLean migratory bird law, was doing something which may be of more significance to country living than most of us are wont to believe. He was setting free nearly 500 important song birds. There were linnets, brilliant yellowhammers, green finches, bullfinches, blackbirds, European jays, chaffinches and redpolls. The finches are hedge sparrows; some are entertaining singers. They eat weed seeds, buds and insects. The yellowhammers are members of the woodpecker family and feed on insect larvae which destroy trees. Presumably these differ from our domestic variety. The European jay is on a higher social plane than our own native blue jay and not so much inclined to bully-rag.
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