WELLINGTON NEWS

Hokitika Guardian, 6 August 1931, Page 5

WELLINGTON NEWS

DEFICITS AND TAXES.

(Special Correspondent)

WELLINGTON, August 14. Deficits and taxes appear to be fashionable throughout the world. We

know the deficits in New Zealand and Australia. and the consequences. South Africa is dealing with a deficit of £2,800,009. Canada has a deficit, Italy’s is about £10,000,000 and Germany’s many times that; the record, however, i s held by that record-break-ing country the United States, the deficit in that republic being approximately £200,000,009. This shows the very instability of American economies. 'flic slum]) has been no respecter of countries, for they have all been severely hit, and the United States perhaps worse than any country, and that, perhaps, .because the swing of the prosperity pendulum was the greatest there. President Hoover has made a poor President, at all events his policy lias been in the direction of caua- | iag the slump to be felt with particular severity by the people of tne country over which he presides. In his eagerness to smooth matters for the Presidential election next year, lie launched his moratorium proposal which appears to have been the foundation of a whole host of economic troubles, and Britain seems to have been made the butt. France has been playing a part that -does not appear creditably. Already in possession of a stock of gold much in excess of requirements she must take additional amounts and in the two weeks July 15th. and July 29th. she took from the Bank of England £10,009,000 in gold, while the actual loss to the Bank during that period was over £31.000.000. Early in the year France was absorbing gold in large quantities disturbing the money market. When this ceased there was a return flow of gold to the Bank of England, and with the accretion the Bank was able to reduce its discount date to as low as per cent. The recent heavy withdrawals of the metal forced up the rate to per cent., making money dear in London, and practically throughout the Empire. It will he interesting to see, in view of the drastic change which has occurred in the London money market, how the New Zealand hanks will deal with the reduction in the deposit and overdraft rates which they have promised to reduce by \ per cent.

The untoward' movement of gold from London and the hardening of money rates has disturbed all markets and the slump instead of lifting as eni|plin!sised|. This (is extremely disappointing to the producers of New Zealand and Australia, who arc just at the opening of a new export season with every prospect of appreciable increase in production. Wool, which in March last gave indications of having finished scraping at the low level, is not expected to show any improvementon late rates, indeed some fear a further fall.

Dairy produce, frozen meat, hides, skins, etc. are all low and give not the least signs of improving. Our producers have already experienced two had seasons, and what their positions will be like at the close of a third season of unprofitable low prices makes one shudder.

Our school of economie s believes that the depression is due to deficience.s in purchasing power, partly, if not entirely causer! by the maldistribution of gold. If this thesis is riglit tnen it is obvious that the withdrawal of over £31,000,000 in gold: from the Bank of England has again caused a maldistribution of the metal and must continue the depression.

That there is a lack of purchasing power throughout the world is too obvious to require emphasising, and what remedy is there in sight? Since the slump must' continue, since the cause continues, the deficits and taxation to square the latter are inevitable.

In almost ©very country the burden of taxation is already nearing the breaking point, it is practically the case in New Zealand, and if the current financial year ends with a deficit, and this is by no means’ improbable, and that will mean more economies plus more taxation. There are very few in the community who are pessimists by choice or inclination, but the blockage in economic conditions beyond which it is impossible to s,ee, is discouraging, to say the least of it. However, we will get over the slump in due course.