WELLINGTON NEWS

Hokitika Guardian, 3 January 1927, Page 4

WELLINGTON NEWS

THE CLOSING YEAR. (Special to “ Guardian.”) WELLINGTON. December 130. The year just closed will be memorable for its many disturbing features which have* been experienced in practically all countries. In the United Kingdom the great industrial upheaval in May followed by the prolonged coal strike were sufficient to prostrate a much more solid country than Britain. Although the losses were heavy the sound common sense of the people whose love for law and order is traditional, enabled the country to weather the Labour storm with the money and risk to life and property. Among the nations of Continental Europe there have been many disturbances, especially in Italy, Spain, Portugal and the Balkan States and Greece where dictatorships have been established and various restrictions placed upon the peoples. In France the currency problem lias given considerable trouble, but France is now settling down and the French now know what deflation involves. Belgium with the assistance of Britain and the United States, is back on a gold basis. Germany under the Dawes’ scheme is gradually recovering and her recovery will mean a good deal to Central and Eastern Europe. All these disturbances have greatly interfered with international trade, and the raising of the Customs harriers has accentuated the position. Perhaps some people may imagine that Europe’s troubles, political and otherwise, have no interest for the people of the Southern Hemisphere, but such a view would he quite erroneous. The coal strike in Britain, for instance, directly and indirectly affected .New Zealand. The strike dislocated the industries and the general trade of Britain, causing a tremendous increase in unemployment and reducing the purchasing powers of tlie peoples. This was immediately felt by the primary producers, whose products could not he sold except at low prices which ultimately meant a 'loss to ns of over six millions sterling, causing unemployment in the Dominion of an unusually severe character. As the effects of the coal strike must lie felt for a considerable time it is hardly like that we can have any improvement in the value of our produce. Apart from this the return to the gold standard of an increasing number of countries must have a depressing effect on prices. For quite a number of years prices have been based on paper currencies which were readily expanded by the nations with little excuse, and commodity prices rose with every expansion. Now prices have to be regulated by the standard of value set by gold. It is authoritatively stared that the general tendency of gold prices will he towards farther deflation and the conclusion is based on the, following broad facts: (1) The ratio of gold reserves to note issue in Europe as a whole is very substantially than it was before the war. (2) The splitting up of three great empires into smaller economic units has decentralised large gold reserves, and therefore tended to make them less efficient. (.T> Most of the cjiuntries in Europe and outside that are none on the gold exchange .standard, aim ultimately to build up linn gold reserves of their own, and in consequence they are likely to become gold traps for many years to come. I) The traditional tendency of Continental central hanks to regard gold as treasure .to he hoarded as soon as acquired shows little sign of being broken. (o') The world’s production of gold in the absence of large fresh discoveries, is likely to decline over the next decade. owing mainly to the probability of gradual exhaustion of the Band. '(>) The physical volume of world production and trade is likely to oxpa ml over the next decade, and this extension will require an increase in the effective supply of gold or force a fall in gold prices. The position is rendered more difficult by the attitude of the United States in respect to the war debts. America insists upon being paid, jU'd at the* same time refuses facilities for payment. International debts onn only lie settled by the export of goods, or the rendering of services, or both, or in the ultimate in gold. ’Hie customs tariff of the United States cheeks the free flow of goods and this is where the difficulty comes in.