1930

Evening Post, Volume CXII, Issue 157, 31 December 1931, Page 11

1930

INTRICATE RELATIONS

FALL -IN- ALL VALUES

DOMESTIC AND EXTERNAL .-;.• v::.:-. ;■ TESTS ■■.■■■'■■• ')

So involved have jntcrnationp! financial'and trading relations become that consideration- of the-economic situation in Now Zealand • to-da.y would be incomplete without some slight reference ib conditlona overseas, especially'those of the United Kingdom in 1930. In that year, which started handicapped by the carry-over of the problems of 1929, the most marked feature was the heavy decline in Great Britain in the prices of all commodities —raw materials of manufactures —in common with their fall the world over. This depression".in/thfe values, of 'products of farms, plantations, mines, forests; fisheries, and factories arose from the impoverishment of tho peoples in almost all countries, or in other words a world-wide-reduction, in purchasing power. Attention wtia (Hvoet.ed;.: to ]owering costs of production, which, of course, included wagr'si"" At tin-, end of! I.JWO there were 2,043,00(1 linrinplovcd in Great Britain alone, oC which 1,'7fif.,000

wore reported as totally unemployed, and expenditure on poor-law relief in Groat Britain rose to over £40,000,009 for the year. Things wight bo attractively cheap, but thero was insufficient money to buy them. This drop in prices in Great Britain naturally affected the returns to Australian, Canadian, South African, New Zealand, and other Dominions of colonial primary producers. The year 1030 then, made the whole world realise that it was much poorer than it, had been after the slump of 1921, much poorer, indeed, than it imagined itsojf to be. British

securities values of two hundred and sovonty-eight representative issues, according to the "Bankers' Magazine,", dropped in 1930 by £514,797,000. Although this was upset by appreciation of certain fixed intprest-bearing stock-i to the amount of £151,720,000, yet there was a definite depreciation in investment" values of £363,077,000. A heavy and impenetrable cloud of depression hung over the London Stock Exchange. Grave trouble indeed for. many firms and for certain personages who had been prominent in the world of trade and finance was experienced. Great British industries such as iron and steel, coal, cotton, woollens, shipping, chemical, and shipbuilding and engineering experienced severe depression in 1930, One bright spot was the motor manufacturing industry. "INVISIBLE EXPORTS." But Great Britain was not singular •a, the general severe curtailment oi trade. Other countries felt the effects" too. - But it had also an adverse balance of visible trade of £392,899,000 as com-, pared with the trade of 1929. Its "invisible" exports represented by receipts from overseas activities such as shipping, insurance business, investments, trading, and so oil, were necessarily reduced on account of the world-wide depression in trade. Shipping suffered not only through heavily reduced passenger traffic, especially in its de luxe section, but through shortage of freight accentuated by drastic curtailment of imports by certain countries. Pessimism became almost a habit in Great Britain, and there were repeated asseverations by prominent public men that England was "not down and out," indicating that many people, not onlyiii the United States and in Continental countries, thought, she was. The retail channel as an outlet was. found to be constricted, for although early in tho year prices for all raw materials were well down by 15 to 20 per cent on those of 1927, yet the ultimate consumer had not been encouraged to buy more by the closer approximation of retail to wholesale prices of goods. The British Government's expectation of a surplus of £4,100,000 was converted into a deficit of £14,500,000. Taxation was increased.: While British trade was so dull, money was relatively very cheap in London, for whilo bank advances decreased because of industrial inactivity, deposits accumulated and tho Bank of England rate fell from 5 per cent, and at the boginning of the year to 3 per cent in May (see bank rates for 1930). Lord D'Abcrnon, speaking at Liverpool 'on 14th November, summed up 193Q in.the' following words:—

Wo are in tl i midst of a severe crisis which affoota-industry, eojnmerco, and finance. It cannot bo said that this .crisis is more severe than others which have been experienced before and surmounted, but it is differentiated by certain marked features. It affects the whole industrial world; \incmployment in the United States of America and Germany being, so far as can be ascertained, equal in amount to thia country, if not greater. Lord D'Abernon then referred to two peculiarities of the general depression of 1030, namely, abundance of production from the land and from industry, and "the failure of politicians in 'his or any other country to suggest an adequate remedy," and ho then passod to the gold -prpblnm. •. An endeavour was made.by the British banks'to assist approved schemes for improvement of the basic industry of Groat Britain, and the Bankers' Industrial 'Development Company was formed, with a nominal capital of ,€6,000,000 and Mr. Montagues Norman, Govornor. of the Bank of England, at Us head. The Government Exports Credit scheme was extended and credit insurance facilitated. But the depression in'trade persisted, and before the year was out the 2J millions mark hud boon passed. GOLD, NOT GOODS. Germany, Austria, the Unitod States, and in some degree France, as well as Canada, Australia, and New Zealand, ere 1030 was out were all faced with unemployed problems as a result of continued low prices for products and superabundance of the fruits of the earth, depressed trade, Government financial difficulties, and mistrust deep seated in the public mind. Realisation of the immensity of the obligations of war-debtor nations and of flic British war debt to the United States rostiltod iv tho eoiisjifciitiou of IJio. Bank for International Settlement with its seat in Basle, and its pharos hold by most of the great central bank's of the world. Time is required for the

bank to function and prove its usefulness in assisting the debtor nations out of tho financial morass in which somo oi: them are floundering. Tho formidable character of the obstacles raised by France and the United Slates to settlement of their overseas trading surpluses by payment in goods and investment securities was painfully realised by the- rest of the world in '1930. They demanded gold, and the gold was diverted from other countries to 'satisfy their demand. Towards the end of 1930 it became all too apparent that surplus of gold available in debtor countries for settlement of international debts was running very low whore it had not altogether disappeared. It became increasingly plain ■ to all the world that in 1930, if the gold standard was to oporate freely, the creditor countries must lend freely abroad and avoid sudden withdrawals. This they showed no inclination to do. Great Britain accepted a considerable part of the payment due to it in goods, but tho United States payments were taken largoly in gold and its tariff made it difficult for foreign countries to pay in goods. In the United States beforo the close of 1930 the spectre of unemployment had materialised; foreign trade began to rapidly fall away; and the prossure of enormous losses in financing cotton and wheat crops whilo markets consistently declined began to be felt. There -was an epidemic of bank failures in th> South and Middlo West. In ■ considering' banks in the United States it Bhould always be remembered that, especially outside the great centres, they differ in many important respects? from banking institutions of Great Britain and tho British Dominions. Of the United States it can be said that there are banks and banks.