WELLINGTON NEWS

Hokitika Guardian, 7 August 1926, Page 1

WELLINGTON NEWS

NEW PRICE DEPRESSION

(Special to “ Guardian.”)

WELLINGTON, Aug. 4. It is reported that farmers in America arc faced with a new price depi'cs- ■ sion in agricultural products which threatens to send many into bankruptcy. Between Juno 15 and July 15, which is a time of the year when farmers depend upon the saile of their commodities to carry them over the winter months, farm produce prices dropped four points, and the U.S. Department of Agriculture predicts a further fall. The purchasing power of farm products, or the. spending power of the farmers has contracted and this must be felt throughout the country. This gives emphasis to the prediction of eminent economists that the world is entering upon a period of falling prices. In the case of the United States it is easy to understand the I position. Europe is America’s best customer for such farm products as aro avkiilablo for export. Europe is forced by the stress of economic conditions to purchase :as little as possible in foreign countries and America is ' i < ( ’ , t

feeling the consequences. The American farmers being unable to export af ■large a quantity as usual are obliged to market greater quantities in theii own. country, which means that supplies lihvo exceeded the demand with t.ho inevitable fall in prices. The fanners in Australia and New Zealand have already experienced this price depression, for the New Zealand wool clip alone yielded £5,000,000 less than in the previous year. It seems from the experience of the American farmers tlfat New Zealand’s produce in the season now about to begin will again meet with a depressed market, and it is difficult to see how it can he otherwise in view of the depressing economic conditions prevailing in Europe. There is thus very little hope of tho trade depression lifting for some time to come, and the opinion of some authorities is that in the slack period of next winter tho linemployed problem will be much more serioys and depressing than it has been this winter. Tho unfavourable economic conditions prevailing amongst tho fanners of the United States has led them to demand that somo effort be made by Congress to stabilise prices, just as tho farmers of New Zealand have demanded schemes ofl stabilisation. Here Parliament has responded with Control Boards. But that suc-h organisations are powerless to influence prices is proved by tho Meat Control Board

which lias failed completely to prevent the meat' .market fojlling. In tho United States a bill has been introduced with the object of stabilising prices, and tho matter lias been referred to the House Committee on Banking and Currency. The proposal is that “all tho powers of the Federal reserve system shall be used for promoting stability of the price level.” The Federal reserve system is the Central Bank system and in some degree acts in the snmo capacity .as does the Bank of England in its relation with the other hanks. The Federal Reserve Banks aro opposed to this and it was stated in evidence that regardless of tho fact that tho, bill specifically stated that the price level referred to was the general price level, and not that of any particular commodity, it was highly probable that tho public, which was not accustomed to thinking in terms of general prices, would make the application to individual commodities, and' thus place Die reserve banks in the attitude of price fixing bodies, a position which would ho well nigh fatal to them, or to any other body similarly fixed. Assuming that the Reserve banks had the power to regulate prices, which they had not, there would still be a good many practical reasons why it would be unwise to entrust so farreaching a power to any body of fal,liblo men. From tho standpoint of human nature as well as of economics, how Were they to safeguard against ignorance, stupidity and had judgment in the exercise of the power to raise or lower the price level. The broad swings of prices were in response to forces over which central banks or control boards could have little control. Price depression, falling markets and rising markets respond to economic forces, and .legislation can give hut little help but’may do a great, deal of harm. -