1931

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

1931

LOW PRICES: HEAVY LOSSES

WAR DEBT MENACE

SCRAMBLE FOR GOLD

Everybody was heartily glad to sec the back of 1930, and hoped for the return of confidence in 1931. There was. much talk at the beginning of this now swiftly departing year that "prices had touched bottom in 1930." . They had not. As the days expanded into weeks, and weeks iiito months it seemed that all markets were unplumbable. Prices . were, and are, the chief concern of | New Zoaland'-'payable prices for exportable surplus products'from which! it derives all its wealth —wool, meat, dairy produco, and the many, by-pro-ducts of those industries, also fruit and, honey and. other products of husbandry and of the forests and mines. Reference is made in graphic form to the three main exports of New Zealand — wool, meat, and dairy produce. But other markets in which New Zealand is not so directly interested were also depressed, and the remained so. Prices had not reached bottom by the end of tho first quarter of this year, nor, it seems, at its close.. Cotton, rubber, sugar, coffee, copper, lead, tin, petroleum, copra, and a thousand and one products which are pent into the markets of the world, persisted in. remaining at low price-levels, and some of them, had never before been so cheap. But for all their cheapness, they do not appear to be sufficiently cheap to stimulate a greater demand. Ideas of attractive prices making for increased consumption with corresponding improvement in values, have had to be recast. . ' ■ : Low pricos, however, were not the only sombre parts of the picture. In Groat Britain, in January of this year unemployment figures reached 2,608,000,----or 1,135,000 more than they were twelve, months "before, and British shipping tonnage in hundreds of thousands of tons was laid up; somo of it will novev be used again. British railway traffic receipts in 1930 were severely contracted, and when the year began were nearly £10,000,000' down on those of the'full twelve months of 1929. Quite early in this year anxiety was folt over the continuous withdrawals of the gold from London on account of several foreign, countries, but principally for France. This gold business was ordinarily a matter of ebb and

flow, but 1931 lias been marked in Lon- ■ don by very much more flow Hum ebb. During July ilio gold reserve of the Bank of England" was reduced by £32,000,000. The shrinkage in "invisible imports, "'too, becamo move apparent, the persistent increase in the adverse balance of visible :rado became to bo regarded as becoming really .serious. Lord Inchcape, mentioning shipping earnings only as an "invisible oxporl," put theso at. £.163,000,000 loss in 1030 than they, were in 1929. Tlie British cotton industry, one of its largest sections, was most gravely

affected, not only-by general trailo depression, but by boycott of its manufactures in India combined with severe reductions in business with China, attributable to internecine troubles in that vast market, combined with the exceedingly low price of silver. A few industries'were 'fairly active and showed signs of improvement, .but in I general British industry as a whole continued depressed all through 1931. Shipbuilding was much restricted, and suspension of work on tho 80,000-ton Cunarder ou tho Clyde was the last] straw. Capital issues in London wero much reduced as compared with that of 1930,

and borrowers, especially Dominions, having . difficulty in balancing, their Budgets, received an unwonted cool reception in the London money market. . . ' . . A GLEAM IN THE WEST. . Midway in the year an announcement was made by President Hoover of the proposed postponement of all payments on debts of foreign' Governments to tho United States for one year from Ist July, wjtlr the proviso that there should be a similar postponement of all payments on inter-Governmental debts owing to important creditor nations. The psychological effect of' this socalled war debt moratorium, was truly wonderful. Men.said, "At last!" The corner, it seemed, had not. only: beeu reached, but rounded. There was an immediate cheerful responso by tho financial markets of London and New York, and. the effect ou : most Continental Bourses for the moment was heartening to a degree. Business: leaders and manufacturers.discerned- in the proposal the. beginnings of restoration to international economic health, a disr sipation of pessimism,' a return of confidence in: trade and finance, and .possibly the dispersal of that vast black cloud of war indebtedness, casting its shadow over the world. Iri France, however, Mr. Hoover's suggestion was not quite so warmly welcomed, aiid approved as it was in Gre^fc"Britain, the United States, Germany, and Italy, but it was eventually accepted by all the countries concerned. - ■ ■ About this'time very serious banking trouble, arose in Austria. When' tho Credit A'nstalt; suspended, ~Bu,t this was satisfactorily dealt with for" tho time being by the Bank.for -International -Settlement?, the Ba/ik .of England, and some of 'the banks of the United States. Shortly afterwards the parlous state of German finance forced itself upon the atteuti-on of all the Powers concerned in Germany's interests. What was truthfully described as "the German financial -cyst's 33', called for urgent attention. Tho "Danat" Bank closed its doors. In brief, that crisis was due to Germany borrowing on short terms in order to meet prior borrowing also on short terms. Credit

was then extended to Germany, and more credit was furnished ti> ■ the K.oichs Bank, and so what threatened . to., be a vast German -financial, crashi with Continental repercussions was staved off. . Attention Was. next diverted.' from. Gormany to Great Britain, and. the continuous . heavy -demands ' -'made- by foreign countries upo,i. Londonfor- gold. . The Gold Delegation of the Financial Committeo of the League of Nations had reported, iri June of last year on the imperative international need of economy in tho use of gold, and had suggested methods whereby that need might bo met, but the delegation : also pointed out that "serious as the prospects may.be, they are not beyond the: control of &■ concerted, and sound currency policy." .' ■

But, so far, there is no certain sign of any "concerted" policy of the : kind. Somo. countries,

including Great Britain, havo involuntarily departed from tlio gold standard. Other countries, but principally Franco and the Uuited States, hold immense reserves in gold, although the United States has already parted With v. considerable portion of its hold-, ing—and fully ' £140,000,000 sent to France. WILD LIQUIDATION. Continental prudence, or timidity, first manifested itself in■•aggravated, form when' Clio cliioi" bank of Austria collapsed, and it was accentuated when the grave financial crisis arose in Gcr-

many in .July (as. referred to), and which involved tho tying up of fuuds lent by London to Germany. Early in August the Bank of England raised the equivalent of £50,000,000 in credit from American and French banks in equal amounts • with which to meet foreign withdrawals. Then the undoubtedly anxious foreigner received a further shock, the result of magnified disaffection in some ships of- the Royal Navy, at that time' in Scotland. A wild scramble of liquidation followed in London-—and it was not confined to foreigners. The British Government itself raised a further credit in New York and Pa.ris

amounting to £80,000,000, but this did not prove sufficient with which to meet the withdrawals of funds from London, which in three and a half days aggregated £43,000,000. In'two months preceding England's departure, from the gold-standard over £200,000,000 in foreign balances was .withdrawn from London, and during that time Britain had £7.0,000,000 assets locked up in Germany.. . ■ .... Mr. Hnowdon, in referring". N) this severe drain on British resources, informed the House of Commons on 21st September that tho circumstances as outlined above were represented to tho Governments of the United States and Prance, and they were asked as to the possibility of the Bank of Eng'.and obtaining further credits. "In both cases,"_ Jie :said, "tho replies were friendly and sympathetic, but afforded no prospect of assistance ou a scale that was pbyioualy needed. 33 The Bank of England on Saturday, 19th September, wrote to the Prime Minister and the Chancellor of the Exchequer, that all the credits of New York and Paris were exhausted, and represented that "it is expedient in. the nation's interest that the bank Should be relieved of their obligation to sell gold," quoting the section of the G-old Standard Act, 1935.' ' Who shall describe the tonsidn. in; London on that following Sunday?. ';:.; The Government, on Monday, 21st September; .suspended tho' Gc|d Standard Act, Mr. Snowden saying ;at that time that between them France and America had acquired three-quarters of tho entire gold in the- 'world, and "buried it in their vaults,'where it is. largely sterilised and useless for the purpose of -promoting'- international trade." ' ■ • : - • ' 'ENGLAND IS SICK." Had not foreign .onlookers grounds for alarm? Mr. Wickham Steed, formerly foreign editor of "The Times, 33 writing just before the British Goneral Election described as typical the opinion expressed to'him by &'foreign newspaper proprietor. . . -. .. "England is sick. You tell me she is still healthy and will recover. I tell you that a medical chart of her disease

would show all the symptoms of degen^ eratipn. You are taxed "beyond endurance, yet you pamper .your, masses; your industries are inefficient, for your tradenniohs handicap them; your young people love amusement and sport above all else, and hate.work. I am sorry to say- :this, for. I. have always .been ■fond :6f-■ England. But I cannot disguise, the truth."' .. ;• •'■:. - ■ England- had "iipt '.'Slipped off" the gold standard, at this, time, Then there .was M.'Andre Siegfried's remarkable book on "The Crises pv England," published, before; the gold. standard was abandoned, a book making, a profound impression upon- many' Britisji readers, whatever -may have: been its iriftuence upon others; •.:•...... | ■ However, British ■ manufacturing in- \ dustries received an iinpotus-froni the departure from the gold standard; closed, mills reopened, and others resumed full time, but this revival proved, as many observers thought it would, but temporary; and in any case it was sure to be met by. tariff adjustments-by foreign countries in order to exclude ex-change-cheap ' British- manufactures. This view proved correct. . France, Italy, Argentina, and other countries imposed such duties; so did the South African Union. i TRANS ATLANTIC! DISCUSSIONS. Next all eyes were turned across the Atlantic whither M, Laval, Premier of France, had gone to confer with President Hoover and United States Government and bank -authorities with th© object of "exploring every aspect of the many problems iv which we are mutually interested." Official' rcforence was made to discussions between M. Laval and Mr. Hoover on the. necessity of somo agroeuient rogarcjing payments of- inter-Governmental.. debts, covering th© period of commercial depression. . A National Government for Groat Britain was formed, followed by a General Election oil 28th October, the National Govormnotit boing returned by. an overwhelming majority. Tire London investment market immediately improvod;" British Government securities recovered lust ground, by from 8 to 10 points, in a month; and foreign exchanges swung : sharply iji favour of England, although they sagged daily during November,'the £1 falling to. about 3 dollars 25 cents early in December, recovering a week later by 12 cents to 3 dollars 37f cents. These quotations should be taken move as illustrations than actual, because fluctuations were not only of daily but hourly oe'eurxenoe. : ; ■'-... " TARIFFS AGAINST TARIFFS. Fearing increases in duties, and ex-1 peeling something in tho. nature of anti-flunijjiiig. emergency legislation, Continental manufacturors- ivnd.'.merchants dispatched argosies of 'steamers with cargoes for England. Ships wore

loaded to tho coamings with every conceivable manufacture from shoes to j looking glasses, cutlery to underclothing, typewriters to cosmetics. • The pressure on finance- to pay for these goods was .exceedingly heavy, and the excess of imports was enormously increased. But tho competition with British manufactures of a like description was most to be feared, for these rush cargoes from all foreign countries •were on such a scale as to provide stocks, it scorned, for years ahead leaving the British manufacturer a bare domestic market so far.as ho was concerned. However, the Abnormal Importations Act was1 pussod and on 25th November a dumping duty of 50 per cent, was imposed on a groat number of articles of foreign- manufacture. This British action was impelled by necessity but it ante-dated.the imposition of surtax on existing duties imposed by foreign countries on ; imports of British manufactures or products or both. That 50 per cent, remains. It is at any rate, an implement for bargaining with. Franco decreed als por cent, surtax on British imports on 14th November. - - . . . . Sir George Paislij.the. celebrated economist, speaking- in London on. 3Qth. November, said Jio never expected to see Great Britain in real danger of. bankruptcy as at .present. He also said it was essential to realise' that "ovory" bank in tho world is insolvent.' 1 But the crisis was not a Bri-' tish but a .world crisis, . PLIGHT OF OTHEK NATIONS,, As ho saw them Sir George Paish described the situation in France and the United States as '.'grave?' and nine days later, in an address at Manchester he emphasised this point, in fact "America's situation (he said) is infinitely graver than Britain's and the French condition is exceedingly grave." Sir George- continued: -""We must call the nations together to consider the position. Reparations should be abolished or redueod to such an extent that nobody' would mind them. Inter-Allied debts should be abolished and America should forgivo the fifty million sterling due yearly from debts. "The world's tariffs must come down. America's tariff policy deliberately drove the world to bankruptcy as far as she is concerned. . ' "Now Britain, has introduced a tariff, preventing debtors paying and making world bankruptcy absolutely inevitable. Her policy is the greatest folly conceivable." Mr. Hoover, on Bth December, made a remarkable disclosure of America's national financial circumstances, saying, ■ "Unless ,r the taxes go up and expenditures go down the Government will have to run behind some 4400 millions of dollars by tho end of next fiscal year." In his inessago to Congress two days later, Mr. Hoover not only asked for legislative-sanction of the war debt moratorium, :but' also- suggested provision being made for payment of instalments to be withheld over a period of ton years, beginning Ist July, 1933. The effect of this later proposal was if anything more reassuring in Great Britain and the United States than his proposed moratorium for one year, made six mouths bofore, The ton-year moratorium suggestion was adopted uy the United States House of Bepresontatives by 319 votos to 100. It was then sent to the Senate. The whole questiou of the moratorium is still under international as well as' American discussion.