The factors favourable to a restoration of equilibrium in the country's economy, such as a
demand saturated by stock piling, proved detrimental to general activity. Whereas industrial pro
duction during the first three quarters of 1951 exceeded that of the preceding year, in the fourth
quarter the relevant index dropped below the corresponding figure for the fourth quarter of 1950.
There was an increase in unemployment.
Whatever importance may be attached to the timely drafting of a programme to counter un
employment, in the light of this development we consider that attention should first be directed
towards a timely re-orientation of the fiscal and financial policy which is at present detrimental
to the accumulation of capital and discouraging to capital investment, by means of which a healthy
increase in employment could be promoted. The history of the year under review has once again
proved that restoration of the economie equilibrium is an essential condition for expanding interna
tional trade and capital traffic, upon which this country's prosperity is so dependent. Recognition
of this fact at home and abroad would undoubtedly benefit Europe's general prosperity.
THE MONETARY SITUATION.
As far as the economie phenomena can at present be judged, the reticence and uncertainty
observed in some sectors of business towards the end of the year need not, iiowever, give rise
to fear of a general economie collapse. Continued rearmament means support for economie activity;
moreover, most countries are to a certain extent still in a state of latent inflation, which they are
gradually trying to overcome, without however wishing to adopt a policy of outright deflation
which it should be remembered so sharply accentuated the great economie crisis of 1930 and
the years that followed.
If allowance is made for the rising exports and falling imports in the second half of the year,
which led us to expect an increase in the volume of money in circulation, the monetary position
cannot be considered unsatisfactory. The volume of money in circulation increased by only fl. 200
million to fl. 7,281 million, of which fl. 4,237 million in current account form. However, the velocity
of circulation should also be taken into account. In the Post Office payments service the clearing
balance measured by the ratio between the monthly turnovers and the credit balance increased from
2.50 to 2.81 the averages for the years 1950 and 1951. Also in the case if the affiliated agricul-
tural banks the velocity of circulation of the current account balance increased viz., from 1.9 to
2.4 measured on the same basis. Finally in assessing the monetary situation mention should be
made of
SAVINGS BANKS DEPOSITS AND WITHDRAWALS
(fl. millions)
1950
1951
285,1
389,1
—104,0
288,0
384,6
—96,6
418,0
430,1
12,1
426,7
466,5
—39,8
399,1
403,0
3,9
457,6
479,5
—21,9
229,3
237,9
8,6
237,9
241,3
3,4
Post Office Savings Bank
AssociationfBanks
Agricultural Banks Utrecht
The trend of deposits and withdrawals at the savings banks also revealed a marked contrast
between the first and the second half of the year under review. In the second half of the year all
the agricultural banks affiliated to a central bank showed a positive savings balance for all months
amounting to as much as fl. 20 and fl. 12 million in the months of November and December res-
pectively and during certain months of the Jatter half of the year this was also the case with
the Post Office Savings Bank and the Association Banks.
3
A notable feature of this country's foreign payments traffic was the improvement in the balance
of payments position. As against a deficit of fl. 1,300 million in the foreign payments balance for
1950 and one of fl. 858 million for the first half of 1951, the deficit for the whole of 1951 will
probably not exceed fl. 475 million. In both years the deficits in the balance of payments were
made good by E.C.A. aid.
In addition to more favourable terms of trade (higher export prices and lower import prices)
and the utilisation since mid-1951 of stocks, the improvement in the monetary position was undoubt
edly aided by the restrictions on consumption and capital investment brought about respectively
by inadequate adjustment of wages to meet the increased prices, higher level of taxation (revenue
in 1951 exceeded the estimates by fl. 570) the obstacle which the so-called fixed government interest
rates presented to the financing of proposed capital investment by the lower corporations, and
finally by the credit restrictions which are dealt with separately later on.
CREDIT RESTRICTION AND THE CREDIT SUPERVISION ACT.
We are glad to say that De Nederlandse Bank has recognised the specific disadvantages to
co-operative agricultural credits inherent in the credit restriction system chosen. As a result of an
amendment to General Authorisation 40D, which contains the credit restriction regulations for the
local agricultural banks, compulsory borrowing from De Nederlandse Bank has since September
1951 no longer been determined exclusively by the credit of the individual agricultural banks ex-
ceeding the limits laid down in the credit restriction regulations, but also the position of the col-
lectivity of the affiliated agricultural banks. All of these showed substantially lower credit excess
than the individual agricultural banks in question. However grateful we are for this concession,
we consider that the credit restriction regulations have still retained too great a measure of arbitra-
riness, as a result of which especially the credit business of our central bank is disproportionately
burdened. We trust that all these objections will be recognised and will be taken into consideration
when the Credit Supervision Act is implemented l).
The results to agricultural credits of the passage of this Bill cannot yet be assessed. It is
gratifying to know that the Central Agricultural Credit Banks can as a result of this act be utilised
in the system of solvability and liquidity control as an organ of supervision in regard to the affiliated
agricultural banks. We are grateful for the fact that as a result of the amendments introduced in
the Bill when it was dealt with by the States General the historical relations of agricultural credits
have been taken into account. With regard to the so-called social economie effect on the credit
policy of the private banks by the monetary authorities which is likewise regulated in the super
vision act, it remains to be seen whether an arrangement on the lines of a gentlemen's agreement
as existing hitherto should not be preferred to a legal system of government-directed policy. In
this connection the temporary character of the act, which is valid until lst January 1955, is of
great importance. There would probably be no serious objection against policy being influenced by
the government from the latter point of view, provided it was resorted to only in an emergency,
i.e. in order to ensure that in the event of a difference of opinion as to mutual adjustment of
monetary and credit granting policy the policy desired by the authorities should prevail, and one
would not therefore need to fear its use as a lasting instrument of government control. In this
connection it would undoubtedly have been of the utmost importance if simultaneously with the
recent reduction of the bank rate by De Nederlandse Bank there had been some relaxation in the
existing credit restriction regulation 2)
deposits
with
with
drawals
balance
deposits
drawals
balance
When these lines were written the (temporary) deferment of the implementation of the credit restriction regulations
had not been announced. This deferment meets our objections most effectively.
-') To this the same remark applies as footnote 1. The explanation of this deferment must probably be sought in the
increased bank rate announced by Britain at the time.
