"CHEAP MONEY" AND PROSPERITY.

Auckland Star, Volume LX, Issue 231, 30 September 1929, Page 9

"CHEAP MONEY" AND PROSPERITY.

Several communications, some of them very lengthy,' have 'appeared recently in the newspapers of tiie Dominion purporting to show that "cheap money," resulting in "dear land," is prejudicial to the interests of farmers. These communications deal only with cheap money for fanners, and I admit that cheap money for the community as a whole would be vastly more beneficial to farmers than if it were .restricted to land only. If the available land of New Zealand were all taken up, reduction of interest rates might .be capitalised fully in the price of land. Even that means only that farmers, instead of unon-ey-lenders, would get a win. As the rate of interest has increased, the convei'se is true. It was frequently said before the war 'that the average equity of farmers in the land they farmed was one-third. A rise of interest amounting to SO per cent and applied to mortgages alone would then have completely wiped out the pre-war equity of farmers., who must 'have continued to farm, if they did continue to farm, by using more intensive methods, helped only 'by increase in selling .price of their produce. As to the purchase of farmers, a SO per cent rise of price, multiplied 'by a 50 per cent rise of interest, would compel the farmers who finance on borrowed money to pay twice as much for any unit purchase. As there is about three-fourths of New Zealand's area undeveloped, any reduction in the rate of interest must act in a twofold way to assist development. If reduction were to pre-war rate, .price of commodities would 'be reduced and cost of development would 'he reduced, money 'borrowed to pay for development being also reduced. The effect of this, with better prices to help, would be greatly increased development of land, more land would be thrown upon the market, large Iblocks would 'become economically developable, and this land would enter into competition with the old settled lands, 'having a tendency to prevent land prices from rising. This is the ordinary and acknowledged action of the law of supply and demand. At the present 'we have a ring-fence of 'prohibitive costs around the better land of New Zealand. The posts are high costs of goods, the .barbed-wire is high cost of money, and dependent on this are the battens of necessarily increased wages, since the law of the land arranger; wages according to the cost of living. If New Zealand takes down t'hat fence it need not worry aihout farmers getting more than their share of the results -of production. Increased prosperity will come in like a flood. Let the .producers of New Zealand first deliver the goods, then tax the results as much as may 'be considered fair. There seems no valid reason why farmers should not be encouraged to make taxable incomes, even at the expensse of some of those -who at present fill in returns. How to do it is fortunately not for me to say. A.J2. JtOBJNJSONv