CORRESPONDENCE

Evening Post, Volume CXVI, Issue 24, 29 January 1934, Page 8

CORRESPONDENCE

PEICES AND EXCHANGE

CHANGED BUYING POWER

(To the Editor.)

Sir, —I appreciate your comment on my letter in regard to the question whethcy the price o£ imported goods from Britain is raised or not by New Zealand currency depreciation. I am not concerned as to how it became depreciated, or whether the action of the Government iv depreciating it can.be justified. I am presuming that the New Zealand currency is different from the British except in name, and you can no doubt reply with justice that by a three to two majority the Lords decided in the contrary direction in regard to Australian currency. I am rather inclined to think that the Australian Government will now take the matter up, and leave no doubt on the question. That is, however, merely a guess for what it is worth. I admit that the number of New Zealand pounds required to buy our English motor-car is greater, but then the value of our New Zealand pound is less than it' was. The depreciation of the currency has not only, as you rightly point out, decreased incomes by 20 per cent., but it has also reduced wages, rates, taxes by a similar proportion. Savings in the bank are also reduced in value. The purchasing power of the people in relation to.Britain is lowered, so that the same number of articles cannot be bought from England as before by many individuals, even though the price of these articles remains the same. When we say that a man was getting a salary of £300 last year, it does not mean four years ago. The pound in the two cases is a different article. Suppose the price for wool remains constant at £10 a bale sterling, then the salary of £300 has been reduced from thirty bales of wool to twenty-four bales of wool, and if thirtybales of wool equal one motor-car, the salary would buy a motor-car two years ago, but it will not buy one now. The only money ever available to buy imports was that received from exports. Leaving out debt charges and all disturbing factors, if we exported produce which fetched £30,000,000, we could buy with it 100,000 motor-cars, if all imports were expressed in motor-cars. With the depreciated New Zealand pound the same produce fetches 37,500,000 New Zealand pounds, and this could still buy the same number of motor-cars at the same price. If it is not being used someone is hoarding the money in New Zealand. Who is it? Is it the producers and exporters? There are, say, £4,000,000 sterling lying idle iv London, but it is equally true to say that there are a corresponding 5,000,000 New Zealand pounds lying idle in Now Zealand, corresponding to this amount. Either the producers and exporters have got it and will not use it, or it has been distributed by them to other sections of the community and they are hoarding it. It has left the import commodity market. Whereis'it? The Government Statistician is certain-' ly in difficulties. Failing another symbol for the New Zealand pound, he has to use the same symbol £ for many different things, to the great confusion "of the student. Imports are stated, for example, last year as £21,000,000, but some of these pounds are Australian ones and some British ones, so that the figure means nothing, unless it is reduced to a common denominator, and as the relative number of British pounds and Australian pounds is not given, this is impossible. The more one looks into the depreciation question the more it appears as if the question of currency depreciation cats vtry vitally into every sphere of economic life, for good or ill. It cannot be looked at simply as a bonus or a discount. The question to the ordinary man bristles with difficulties', and you are to be congratulated for the space you have devoted to such an obviously important matter.—l am, etc., SIMPLE ARITHMETIC. (To the Editor.) Sir,—Like "Simple Arithmetic" I am neither a farmer, an exporter, nor a selfstyled economist, but merely one of the growing number who recognise the increasing need for people to use their own intelligence, and not..accept,as, fact what writers would have'them accept. • When the rate of exchange was increased, we .were told that the then sagging market for our produce was due solely to the exchange, and as the market still further declined so did "The Post" increase its tirade against the Government. Now that wool is fetching 20d, which at par of exchange would be roughly 13d, we do not hear so much of the wicked effect of tlie exchange. What "Simple Arithmetic" stated is quite correct, namely, that the 25 per cunt, exchange has not increased the price of an imported article. The exchange rate has lowered the purchasing power of our currency—those that have it in plenty are gnashing their teeth—in the same way that the present price. of butter has lowered the purchasing power of a lb of butter which is. causing our farmers to scratch their heads.. If it took 10001b. of butter at 2s per lb to buy a motor-car, it takes 20001b at Is to buy the same priced car. Has the price of the car increased because the exchango lias been raised? The car price is the same, as "Simple Arithmetic" states, 'but the purchasing value of the butter has been lowered. To assist the farmer the Government lowered .our currency so that instead of giving 20001b of Is butter-for a car he now gives roughly 15001b. People are slowly realising the principle that the present 'desperate position of the world is due to the present high purchasing power of the world's currency dve i to the decreasing amount in the possession of - the masses. Mr. Roosevelt is setting the world an example by attempting to control tlie pm'chasinjr power of currency instead of permitting money to control the price of goods and services. Our present Government. recognised this evil and devalued our currency; preparatory to the setting tip of the Reserve Batik, which will take from vested interests the huge power they now. possess.—Iv am, etc., ■ ..•■ ': '. . ■■•'■■ ■■■' C.J.L. - < (To the Editor.) Sir, —Your corespondent "Simple Arithmetic" is certainly simple. He finishes by saying exchange may reduce incomes but does not raise prices. Surely for the wages or salary man and the purchaser of imported goods this is a distinction without a difference. The fact still remains that the people of this.Dominion have to pay either directly or indirectly 25 per cent, to presumably assist the farmer. I should like to be informed through your columns whether this really works out at 25 per; cent. on both imports and exports, or either one of them, or is it only on the balance of exports over imports. In either case it appears to me that the greater our volume of trade the more the wage-earner and taxpayer have to pay, and not only is this so but the higher the price the farmer gets for his produce the more the local consumer has to pay. I know that we all exist on the products of the land, and that the producer is necessary, but will your correspondent point otitLhow under present circumstances the New Zealand farmer can claim to be (lie backbone of the country?' Is he not rather under present conditions rather a drag on the rest !of the community, and if we face the.fact that . notwithstanding the recent rise in wool prices we have to prepare for an ever diminishing market for ouv primary produce, would it nbt be better for pur statesmen to tackle the situation at once and from the standpoint of the best interests of the whole of the community, and not, solely the interests of the farming class? Because, after all is said and done, the farmer has to depend upon the consumer, and if you lessen the Curchasiiig power of or decrease the numei- of *the consumers although you may raise the price you are only once more ■travelling in the old vicious circle. What these colonies and Dominions require 'is more population and more secondary indns-! tries, and the money taken from the people spent in providing useful work at lair wages.—l am, etc., JOHN BULL. [The Government Statistician has clarified the position in the Year Book, where separate tables are gi.ven showing imports and exports, (1) in sterling, (2) as re. corded, (3) in New Zealand currency, so that the true trade balance can be ascertained. "Simple Arithmetic" suggests that, as the sterling value of our exports is unaltered by currency depreciation, the same value in imports can be bought. This is correct, but the redistribution of internal income checks demand, because the purchasing power of all save exporters has been reduced. "C..T.1*," argues on the same lines as "Simple 'Anthmeljc," Jjiit

"goes further by advocating permanent depreciation. It is necessary. only to point out that our currency was depreciated when Britain left the gold standard (as we continued 10 per cent, off sterling). Then-we made the depreciation excessive by a 25 per cent, exchange instead of 10. "C.J.L." is giving a wrong impression when he states "we were told that the then sagging market for our produce was duo solely to. the exchange." What was stated and can scarcely,..be disputed was that competition in depreciation—Australia, New Zealand, Denmark—helped to intensify competition in the British market (thus forcing down prices), and was also a factor in keeping alternative markets such as Canada closed.—Ed.]