WELLINGTON NEWS

Hokitika Guardian, 29 April 1930, Page 5

WELLINGTON NEWS

TREND OF WORLD PRICES.

(Special Correspondent.)

AVELLINGTOX, April 27. A banking view of this interesting problem of trend of world prices which is causing economic disaster the world over, is furnished in a survey of the position in the Midland Bank (London) Review. This journal says that “The whole tendency of declining prices, whether of commodities Britain produces. material Britain buys or food that Britain eats, reacts on Britain’s trade. Ls it unreasonable to suppose that the present conditions of industry is closely bound up with the trend of world prices?” If the answer is in the affirmative and the spread of depression over wide international field points in that direction then there must also be an association between business conditions and the trend of bank deposits.

Deposits have not only ceased to ■grow, but ace actually lower than they were a year ago. In short we have a shrinkage in the volume ofj money accompanied by a fall in the price level which seems to be an unassailable definition of inflation.” Here we have it on high banking authority that the fall in the world level of prices spells deflation, and if that is the case are the steps being taken in Australia and N.Z. suitable to the occasion ? Obviously there must be all round deflation otherwise unemployment will become a chronic economic problem. The Review surveys the cause of the recent increases in unemployment in Britain and 9ays “If reasons are to Be sought for this relapse it is by no means improbable that one of them is to be discovered in commodity prices.

The level of wholesale prices has continued to follow a downward trend, almost precipitate in its steepness in recent months. No one probably would have imagined, when the question ’olj this country’s return to the gold stand-,' aid was under consideration, that within five years British wholesale prices would have fallen to (lpyel little, if; any . more than one quarter above that of < 1813. But such has been the course of; events,:]arid’ the trend of world prices, traced] air excessive burden on this , country; in ■ view of disparities widened , with every step in the downward move*} meats,< .between.- .wholesale,. ,apd retail prices, • wages cuts and oLproducteion and services (in* unsheltered as 1 opposed to sheltered industries.” These disparities are operating here, and the sufferers are the producers and exporters of primary products, for such poducts have to' be sold m open competition in the world’s markets and at the world level of prices which is a very low one, while the sheltered in-)' dustries are seeking more shelter,’and thus the trouble is prolonged. If,. aa| the Review states, the conditions point-:, to deflation, then deflation cannot be] confined or restricted, but must be get£»l eral. The schemes of politico ns for, dealing with unemployment are cruder and have no sound economic basis, ai? least they are palliatives of a short term character.”

What everyone in New Zealand and Australia must recognise is that the economic conditions are radically different to what they were, that we are in effect back to the conditions of 1913-14 so fa/ as prices for our export products are concerned and these brine in the national income and payments for all other goods and for services must correspond. Our case is slightly different to that of Australia, because our excess of imports over exports has been relatively small, and the very in crease in the exchange will cause r speedy adjustment. Our trouble is clue to the fall in the values of primary products and we have to meet the sit nation by making the necessary adjust merits. Some people hope and a good many believe that prices will improve, but they can produce no warrant for their hopes and their beliefs, but their existence afford a tolerably good excuse for making adjustments. Their is also the fact that no om cares to suggest changes because acl justment downwards would he unpopu lar, besides anyone making the sug gestion would be branded as a pessi mist. If, as the Midland Bank Month ly Review declares, we are witnessing a deflation of world prices of com modifies, the readjustment must be un dertaken everywhere in all countries Efforts are devoted to postponing thn J task but it must he undertaken.. Th peak of the crisis or the depression o .whenever one choose to call it, has no yet been reached, but when it is reach ed politicians and people will rise l the occasion and set about putting til house in order. The obstacle is tlm self-seeking socialist who voices silly slogans and talks dangerously.