WELLINGTON NEWS

Hokitika Guardian, 6 January 1932, Page 6

WELLINGTON NEWS

TRADE AND EXCHANGE. (Special Correspondent)! WELLINGTON, Jan. 4. Under normal world conditions the exchange problem was never a serious matter, and there was no question about the distribution of gold. But the conditions -to-day are abnormal, I and they have been made abnormal by i the stupidity and cupidity of states- | men. The nations must buy from one | another if they wish to sell to one another, and the universe has been so constructed and. the community of nations so ordered that one nation can produce- - certain articles in profusion and beyond its power of consumption certain commodities, and for its surplus production it must find a market. There are other countries both willing and anxious to absorb that surplus, and they in turn produce commodities in excess of their requirements which they must sell and which other nations ate willing to purchase. An agricultural country would need many manufactured articles that it cannot produce, hut which are necessary for its material progress, comfort and prosperity. Thus the surplus products of one country are exchanged for the surplus products of the other country, in other words trade is baiter. In our modern civilisation this barter business is highly complicated, but at base it remains barter. _ In the course of this interchange it is conceivable- that one country may purchase more from other nations that it has sold to other nations, and on balance it would be owing more than is owing.to it, that is-to say the balance of trade is against it. This balance must be paid, and paid in the currency of the nation to which it owes money, and the simplest way of discharging this obligation is to pay in gold which is acceptable to alii nations. In pre-war days the movement of gold from one country to another was insignificant because goods and services from one country were paid for by the goods and services of another country. Exports and imports plus the incidentals connected therewith about cancelled one another.

If we look back on the trade returns of New Zealand it will be found that the proceeds from our exports were in many single years insufficient to pay for our imports plus interest on public and private indebtedness for interest, etc. due abroad. The difficulty was overcome by borrowing abroad, and in the years that wo borrowed most were the years when our imports were high. We were not troubled about exchange and there was no exchange problem to trouble us. The banks made a small charge which was wmstanit" for long periods, and now the. exchange problem is a serious matter causing inconvenience „nd worry. We are not the only ones to lie troubled and worried over exchange, for that is now universal. What has caused all this- trouble? There must have been a beginning, when and where did it originate? Up to about September 1929 the trade of the world appeared to be normal, and exchange was normal between the countries on the gold standard and the gold exchange ’standard. In Oatober of that year there wa-s the notorious break in prices on the New York Stock exchange, when billions of dollars of paper profit were wiped out and millionaires’ were turned into beggars practically over night. New York buttoned up its pockets and ceased to lend to European nations and particularly to Germany, an d that was the beginning of Germany’s troubles, for she was reconditioning her factories and reorganising her industries with the aid of bon owed

moneys. Austria was affected similarly and as the difficulties of these countries increased the lenders lost confidence, called in their short-termed loans a»d. thus made difficult positions much more difficult-. In -addition to this the United States put into operation a high protective tariff, and at the same time insisted upon the payment ol war debts. Britain has to pay annually about £33,000,000. This must be paid in dollars, and to obtain the dollars goods must be sold and services rendered. The high tariff prevents the sale of goods, consequently the balance, whatever it amounts to, must be paid in bar gold, tile international currency. That is why the United States is nmassing gold. As a reprisal other countries raised their tariffs, and even free trade Britain has been forced into action. International trade is chaotic and exchange is in the same state as a result. War debts, reparations and tariffs must- be revised if world prosperity is to be restored, m other word s the nations must revert to common sense.