WELLINGTON NEWS

Hokitika Guardian, 5 June 1931, Page 7

WELLINGTON NEWS

GIGANTIC DEFICITS (Special Correspondent.) WELLINGTON, June 2. Tlip year 1931 will take an tin,enviable place in history as the year of gigantic deficits. Our own national accounts show that the revenue for the year enuod March 31 amounted to £23,003,931 and the expenditure to £24,708,042 thus reveahng a deficit of £1.639,111, whcli is the largest deficit we have had for a. good many years. But our deficit is small compared with what Australia has to face, for at the close of Apri, which accounts for ten months of the financial year there was already a deficit of over £36,000,000. The people in the United States talk and think big, and records seem to bo their ruling passion.

Tlie Treasury Department of tlie United States indicted last ivealc that a deficit of 1,000,000 dollars (£300,000.000) will be shown by the public accounts on June 30. Mr Andrew Mellon, a millionaire banker, is the Treasurer, and the position disclosed is not very flattering to Presi dent 'Hoover. The deficit is to b e wiped out in the traditional way, that is by borrowing, a’kl a long-term issue will be made in dirt course. Large as the deficit is, it will not trouble America very much and a loan will readily be taken p beoanse money is in abundant supply and cheap. That large countries a» well as smalj countries should thus be burdened with deficits in their national accounts is to say the least of it i't a remarkable phenomenon and calls for some investigation. Economists, financiers and bankers have been devoting a good deal of close attention, its cause and what remedies must be applied to bring about a recovery. Some economists bf note insist that the money trouble is the cause and plead for a managed currency co-operation on the part of the central banks . The steadily diminishing output of gold and the maldistribution of the world’s existing supply of the yellow metal have been emphasised, and a good many people accepted this view and have joined in the agitation for reforms inbanking and currency. There are other economists and bankers who insist that the supply of gold is adequate for the world’s trade and the present depression and the fall in the price level has been caused by trade restrictions and tariff barriers, in other words we are suffering from a“bartor” crisis a»d monetary crisis There is - • -mortage of gold in the United Start's and money is cheap tluno, yet America appears to bo suffering more severely than any other country and the gigantic deficit announced is an indication of this. But the verbl couid well wish that the United .t'tales c°'->ld he made to suffer a great deal mortUtha'ii slie has' suffered so far Ici-mum that co.tii;ry mon be forced to realise that it is p a rt of the world -the commercial world- and cannot enjoy any privileged isolation,

Aineiica built up n great Export: trade in the early post-war years when Europe was unable to compete. America wag sending her manufactures to all parts of the world, and this led to mass production, which was further stimulated by instalment purchasing on th e part of consumers. Not content with this the United States pursuing its traditional policy of isolation increased an already high tariff ju the face of protests of practically all the nations of the world, who promised reprisals. However, it is significant that soon after the Smool-Hawley Tariff as it is known, came into operation, commodity prices began to recede, America’s big export . shrank and may it continue to shrink, the exporting houses had to reduce their activities and this spread. Tariff barriers must come down if the world is to emerge from the present repression, and the United States must set the bad rolling, for that country has been guilty of initatjng the greatest world-wide tariff war in history. America is a great, in fact the greatest creditor nation in the world to-day, and its debtors can only discharge their obligations hv selling goods and services for dollars so ttyat they can pay interest in dollars. ,ri he United States by its high tariff prevents debtors from obtaining tilt* necessary dollars, and as they have not a sufficiency of gold the weaker of the debtors must bankrupt. American business men and financiers are seized of tire position and are demandjog a drastic revision of the tariff at a special session, but Ameiica like other countries is blessed with political patriots who think more of the party and themselves than they do of the 'country. When America reduces her tariff and permits trading the depression will lift.