WORLD OUTLOOK.

Hokitika Guardian, 21 February 1922, Page 4

WORLD OUTLOOK.

FARMER AND TRADER,

AN OPTIMISTIC VIEW

“Should tho Conference now sitting at Washington result in the leading nations pledging themselves to a programme of disarmament, there may be some hope that the present heavy burden of tavation, which is depressing industry and hampering the exchange of goods and services between the various countries of the world, will be sufficiently lightened, to permit an accumulation of capital, and to encourage it once more to flow into the accustomed channels of trade and commerce.”

| disarmament CONFERENCE. I A review of world finance and trade j conditions by the leading banking organisation of Canada thus sums up, at the beginning of the year, the measure of relief that the Conference may afford in the solution of the problems of the day. ‘Efforts t G bring the cost of manufactured products into harmony with the lowered scale of prices for agricultural produce are still in evidence siays this authority. Further evidence of the endeavour to bring the domestic machinery of production and exchange into more active and sal is factory operation is shown by the effort to reopen ‘activity in the building trade on the American continent. The c°st of building, 'and particularly the cost of labiur, is such, however,af to make the execution of present construction plans impracticable; As in England, Australia, and New 'Zealand hopes have not yet materialised of a reduction of the rate per hour paid for labour. The investment of capita] in accordingly still being with-held and is not attracted by the high mortgage rate of seven and eight per cent in urban centres. The prospect of print is too remote, and the risk too great to warrant builders paying such rates of interest in addition to the abnormally high taxes to which improvements arc subject. Rents and carrying charges oil property represent a large proportion of the cost of production and distribution of most commodities, and substantial reductions in these items are, it wood appear, essential to renewed business activity. MONEY’S PURCHASING POWER. The exchange rate and purchasing power of money is a question of such great interest in the regeneration of the w,erld’s( economic stability that the conclusions of a lending world financial authority expressed to the International Conference at Brussels, afford food for thought. “Our willingness to pay a certain price or foreign money must ultimately and essentially depend on the fact that this money has a purchasing power, as against commodities and sendees in the foreign country. Given a normal freedom of trade between the two countries, n rate of exchange will establish itself .between them, and this rnt-e will, smaller fluctu-

ations apart, remain unaltered', as long as no alterations in the purchasing power of either currency is made, and no special hindrances, are imposed on the trade. The parity may be called the. purchasing power parity, as it is determined by the quotient of the purchasing powers of the different currencies.” INTER ESTING INVESTIGATION. An investigation, on the basis of this theory, disclosed that while wholesale prices between Canada and the United States remained fairly close during the years 1918 and 1919, a wide divergence

began in 1920, and has continued up to the present time, although recently showing signs of contracting. This divergence amounted at the end of last year to 16.2 per c®ut of the 1913 [prices. A further interesting discovery was made. Comparing the fluctuations of the American and Canadian dollar, the purchasing power of the Canadian dollar in Canada was only 88.3 per cent, of the purchasing power of the United States dollar in the United States at the end of 1921, while tho purchasing power of the Canadian dollar in the United States at the same date was 92.4 per cent. CANADAN AND NEW ZEALAND FARMERS. Western fanners in Canada,- have been living under conditions that are analogous to those of the New Zealand fanner. Finding it difficult t 0 meet maturing obligations, they are not making new ' commitments. The sudden contraction in the value of wheat in Canada should, says the authority quoted, hasten the adjustments of the prices of those services, and goods which the farmer must have in order to carry on his operations. Wages the main factor in transportation charges, whether earned by actual service on the railways or in providing fuel or other supplies which they require, have yet to undergo in Canada drastic readjustment to make possible the restoration of normal conditions. Here the analogy with New Zealand differs for the readjustment is being sought by the policy of retrenchment recently established. MEETING' THE OBLIGATIONS.

The present price of a bushel of wheat in Canada is below the price of a bushel of oats in 1920, yet the wages of harvest labour and the cost of threshing are on the same level. The result is that, in the districts farthest removed from market centres, if present conditions prevail during the winter, many farmers will not receive sufficient revenue from the proceeds of their crops and live stock to discharge current obligations and in districts within easy reach of the markets, those farmers who depend on cereal products, or upon beef or store cattle, will have difficulty in doing so with comfort. The decline in the price of dairy products in Canada has not been so marked ns in the case of cereals, and thus farmers who ship cream and milk are in a relatively better po--sition. Under these circumstances the tact that the Canadian fanners have been able to keep up their payments has occasioned a good deal of surprise. “DISTINCTLY ON THE MEND.”

Distinctly on the mend, it is said, are conditions affecting the trade and -n----dustry of the United States at the beginning of the year. Wages are lower and tending, downwards, although in the case of skilled and “unionised” labour ,to quote an American economic authority ,they are still almost double those of pre-war days. The cost of living is waiting there for the reduction of wages, and the lowering of wages waits on a reduction in the cost of living—the result is a deadlock that makes further progress difficult and ■low. Readjustment is being hampered by the slowness with which prices to the consumer respond to reductions in the primary markets. There is a reassuring ease in the money market, in sir iking contrast with the scarcity of funds and almost prohibitive interest rates prevailing early in the year. Raw materials, with the possible exception of cotton, are now selling at prices from which no further decline need reasonably be expected. Credit conditions arc improving rapidly, and it is apparent that the year’s financial failures have greatly cleared the atmosphere of the mercantile world. The stabilising

of tho disordered currencies of Europe is sought by leading financial authorities, through the medium of a worldwide economic, congress. The rise in sterlin.' exchange, (it is 4.36 dollars to the £. February riftli), engenders a more hopeful feeling as to the prospects of a better outlook regarding foreign Lade. Sf.oelts throughout the world are rnuHtv diminishing, and reordering will la' necessary before long. It is pointed out that conditions, as they stand to-day. do not spell a full measure of prosperity, but, above the man-.- d-sr'!"!■;)gin r and unsatisfactory features < ’’ ibe present situation it is clear, savs this ' im-riean authority, that ( onfiflcm-e is fast returning to the business ' nrid. and that the time has arrived when commitments and new venture, may tie entered into without incurring mr>re than tlm ordina'rv risk.