WELLINGTON NEWS

Hokitika Guardian, 30 December 1931, Page 6

WELLINGTON NEWS

A YEAR OF ILL OMENS

Special Correspondent

WELLINGTON, Dec. 2iy

No one will regret the passing of the year of Grace 1931, for it was packed with, economic tragedies that may continue to cloud the current year. The past year opened quite favourably throughout Europe and North America,,, and many business men with woGfTjreputatioiipyere moved to predict that there woulefv be a revival, some said in the summer, and some in the autumn, and Mr Rodger Babson, who has a very high reputation in the United States’* as a business forecaster, ventured to write President Hoover and announce to him that the outlook was for an improvement, and he seemed so sure of his ground that- lie told the President that he would not be surprised if there was a shortage of some classes of labour in America. There was no one to dispute Air Babsents predictions, indeed it would have been futile to do so for tile conditions at the time were excellent.

Trade appeared to be showing some signs of revival, Stock Exchange securities exhibited a rising 'residency and money rates were tending downwards. The Bank of England gold reserve began to expand and there was a week when the gold holding exceeded £164,000,000, while for the past few weeks iC lias not reached £121,000,000. The Bank of England discount- rate was reduced by easy stages in the usual way to 2} per cent., and with money so cheap hopes ascended. But a change came over the scene towards the end of May.

The Central Bank of Austria- got into difficulties and the burden of helping the institution fell upon the Bank of England. Then Germany found herself on the verge of bankruptcy. France became alarmed and started withdrawing gold from London, Amsterdam and New York, in tact from wherever she held credit, but it,was London that had to stand the brunt. The raid on the Bank of England’s gold reserve was so persistent, notwithstanding that the discount was raised to 4> per cent., that- there were sinister remarks regarding France’s action.

In June, President Hoover proposed a moratorium on War debts, and was impelled thereto by the very risky condition, of Germany. The proposal was eventually modified, because France strenuously opposed the scheme. A conference of seven powers in liOiidofCpatched up a scheme which was of a 'temporary character. The Hoover one-year moratorium has been confirmed by Congress 'during the past few days. The persistent withdrawal of gold from London on the part of France continued throughout July, August and well into September, and on the twentieth day of that month, Britain abandoned the gold standard and at the same time the Bank of England raised its discount rate from 4 i per cent, to G per cent., at which rate it still stands. France’s magnetic attraction of gold naturally caused a retrograde movement in commodity values, and foodstuffs and textiles suffered liiore than others.

When Britain departed from the gold standard there was an immediate ries in commodities which was at base psychological. These upward spasms were noted when the British elections swept away the Labour Government, and it was in evidence again when the Scullin Government was routed in Australia. Psychological effects soon evaporate. The year closed with corns modity prices extremely low. The forecasters, who were so optimistic at the beginning of the year, based their prediction on tradition and experience. None of them allowed for unusual economies, in a word they failed to appraise the- economic effects of reparations, war debts and high protective tariffs.

Everyone is now alive to the fact that these are the impediments to the revival of world trade and world prosperity. Tlie new year opens witli those bar raising conditions very, much in evidence. Much will depend upon how the interested parties receive the committee ; that lias examined into Germany’s affairs and her capacity to pay. War debts yet remain to be revised, so that evils of 1931 are carried ovei into 1932, and in addition we have the war in Manchuria which may or may not have serious developments, and what is likely to happen in Gandhi’s India it is hard to tell.