WELLINGTON NEWS

Hokitika Guardian, 2 October 1931, Page 7

WELLINGTON NEWS

& . I IS THE SLUMP OVER?

(Special Correspondent)

WELLINGTON, September 29

! There are indications that we are now witnessing the beginning of the end of the present world-wide depression, but the end is a very long waj off. Just as the slump had a beginning so must the return to prosperity have a beginning, and the beginning we now see. What is the evidence that can be marshalled in support of this? We have the fact that world commodities like cotton rubber wool and the base metals are tending upwards based on tlie pound sterling which is not on the the gold standard. Sterling has depreciated since Sunday, September 20, and the exchange value of sterling expressed in United States money is 3do!s 80 cents at the time of writing. The unit par of exchtnge is 4do] s 86 cents to the £l, that is the gold in a. sovereign is equal to 4.86 dols./ Before Sunday, September 20, while the Bank of England was meeting demands in gold the exchange rate was 4.80d015. Now it will he seen that the £ sterling will not exchange for more than 3.80d015. That is to say those in the United States wanting to buy or willing to buy sterling exchange will not give more than 3.80 dels, in New York for £1 in London. That is a fairly steep depreciation, but it should occasion no alarm for foreign countries are able to give a little more than formerly, because their respective monetary units with exchange for more sterling. AVe are getting the benefit of this especially in respect of wool which shows a welcome recovery. When the London wool sales opened on September 15, there .was an all round decline in prices of from 10 per cent to 15 per cent, resulting in heavy withdrawals, but now that decline has been almost recovered. It may be that butter and cheese and meat and other foods stuffs will not not show much of an advance, but it must be remembered that in Britain there has been a cut in salaries and wages and heavy taxation has been imposed. The purchasing power of the pepole must be lowered through this, consequently they cannot be expected to pay high prices for foodstuffs. Those who have read the voluminous cable messages published in the daily papers will have noted that there has been a spurt on tile London Stock Exchange in industrial shares. In Lancashire cotton mills that have been out of commission are resuming operations because there .is a profitable business to be done, and there is activity in other British industries. This means the absorption of liiol'e labour, and this increased number of workers will be in a bettor position than before to satisfy their requirements, Foreigners through their foolish panic have done Britain a good turn, and New Zealand and Australia must participate in this. Britain is off the gold standard while the United States and France are not, and yet Britain will be on her feet sooner than the others because she has her Budget balanced without borrowing. The United States had a deficit of nearly £2OO millions for the fiscal year ended June 30 last, and ii nothing is done the current fiscal year will show a deficit approaching £3OO millions.

“The slump is over” so prominent men say, and their opinions appear to he justified. But what they mean is that the downward trend of commodity prices has been arrested. There will of course be fluctuations, some commodities may go lower,but the trend generally i s upwards. Wholesale prices, that is the prices of raw materials, will and must advanec, but retail prices, that is prices of manufactured and processed goods, will and must decline until the present disequilibrium between the two arrive a i their true relation. This will take considerable time, that is inevitable, but the consoling fact is that the world has experienced the worst of the slump anq can now look forward to .slow but certain improvement. Those who anticipate that prices will revert to those fancy figures that were’ruling in 1928 will be greatly disappointed. New Zealand has a great deal of adjustment to do and that adjustment will-be painful. Once it is over, however, we will be rid of the unsound elements and the “lame ducks” in business, and there will be a better balance and more confidence.