Farmers and Exchange

Gisborne Herald, Volume LXVI, Issue 20002, 29 July 1939, Page 16

Farmers and Exchange

Sir—ln your footnote to my letter in Tuesday’s issue on “Farmers and Exchange," you suggest that “I overlooked the difference in procedure” between Great Britain’s and New Zealand’s financial methods. Not so. Great Britain borrows her credits, paying interest .thereon, as in the past, for ever, an(l placing a debt on children to be born a ccn'ury hence; or to be repudiated by some Governnebt before then. It matters not whether the investors be big or little, it is the workers in industry and the workers of the soil who do the paying; whatever the individual tax payment may be, it has to come from production. And production cannot ;o on indefinitely carrying additional burdens of overhead debt. To any student of economics Great Britain’s financial position must cause grave concern, if she continues to finance huge military preparations from loans. Her grip on world trade must decline, as she will claim more and more of the world’s production to meet her indebtedness. Other sources of trade will be .opened up, where 'nide can be carried out on better .terms. New Zealand can, .tor Instance, increase her population enormously by ' internal development creating her own market for the bulk of her produce The credits 1 of .New Zealand on the other hand have been issued by the Reserve Bank, creditsk which are practically costless, secured on the

development which they create, in exactly the same way as overseas loans in the ,pas't. The decision of the Reserve Bank to recommend a loan of £4,500,000 on the local market was no dloubt a move to assislt Mr. Nash in London and had the desired effect. No situation can occur again as that which necessitated Mr. Nash’s visit to London, provided, as I stated, “a careful watch is kept on imports.” The guaranteed price, in excess of export values, cannot purchase goods from overseas, but can only be spent on services in our own country; for instance, in employment to develop farms, of which the farmers complain of their inability to pay at the present prices for produce. It can have no inflationary effect if spent in employment under a system of fixed commodity prices, or adjustment by the Price Fixing Tribunal. Should it be found that the guaranteed price occasioned a greater increase of currency than could be used economically by the labour available, a suitable type of young .man and woman immigrant could be encouraged to settle here. This course would have the effect of creating a more rapid arrest of the deterioration in our farm lands, fencing, etc., and at the same time increase our local commodity markets, ■uid assist in our defence should occasion arise. Should the farmer elect to leave his extra earnings going unused, steps would have to be ‘"lien to see 'that they were used as required. SERIOUS;

l The correspondent still overlooks ■he difference between the issue ol '"Vc« »Mincr credit by the Reserve Bank —Which the bank directors have themselves condemned 1 —and the borrowing from .the public savings which •:u .he prior production of real -vciV.h. In. the one case there is real wealth behind the money and in, the "Kme i.s nothing. The issue of credit in excess of the value of production, as the Reserve Bank also points out, must have an inflationary effect resulting in an increase in the cost of living and' a reduction in the j value of all wages and pensions.—Ed. 1 Herald.]