Hokitika Guardian & Evening Star MONDAY, NOVEMBER 22, 1920.

Hokitika Guardian, 22 November 1920, Page 2

Hokitika Guardian & Evening Star MONDAY, NOVEMBER 22, 1920.

PRODUCTION AND PRICES, The fall, the severe decline of prices in fact in the primary products of country, that .is, hides, 'tallow and wool, is likely to have a disorganising effect on the genpral prosperity. In connection with the prosperous times that New Zealand has enjoyed of late, and which Mr Massey noised abroad the other day as some counter action to the Canadian business attitude towards this credit financially, it has gQt to be remembered that the prosperity sprang in a great measure from the high prices obtained for the primary products. Over a goodly term the Imperial commandeer kept "p prices abnormally, and great wealth, running Into many millions, came into this country. The commandeer has terminated, and on the open market prices have had a severe fall. The amount of wealth will not be forthcoming in the same volume now. The money will not be flowing in as readily and this lack of credit will lie felt by all business people reeking accommodation from their bankers. The latter wjll j)Qt have at their disposal the same pletlwa of funds for use; in point of fact there are-very marked signs that there is going to to hi? n stringency and the business people operating pp overdrafts will be the first to feel it. During thp war period, and the shortage of shipping, imports did n°t come forward in response to orders, hut now that shipping is easier and freights flow, also it is possible to obtain a greater flpw of imports. But. fchp goods hpve tp be paid for, and the volump pf imports has so increased as to outrun the yajue of the exports, and so the balance in banking is against New Zealand. More money has to bo sent out of the country to pay for the goods which are coming in, than money is coming iu for goods which are being sent away. This is not serious so long as the supply of money holds out, but where traders have to rely on bank accommodation to finance their buying, the stringency is quickly felt because with limited money to handle the banks have to restrict their lending operations. This will bring about a shortage of supply in many lines of commodities, and where the demand js insistent it means that prices are not going to fall readily fo:- imported goods. The economic pendulum will swing steadily as between supply and demand, no matter how human effort may be directed to try and /regulate markets. The price is essentially governed in the end by demand, which can be met only by the supply. This is manifest now in regard to our primary products. The wool stores are bulging with their accumulation 'of products. Tha Heme and other markets have their accumulations also, and the supply has outrun the demand. Where there are sales it must be at reduced prices, and to this country the curtailment of the flow of money is going to have its effect in various directions. The trend of the position fully warrants the many warnings which have been given regarding the approach of a financial stringency, but despite those warnings New Zealand is very unprepared the I tightness and the conditions for a time at least will be very irksome.