STABLISATION

Hokitika Guardian, 9 July 1932, Page 6

STABLISATION

VIEWS OF FORMER PRESIDENT

WELLINGTON, July 7

Stabilisation in banking, currency ail'd the' rate of" exchange were questions dealt with by Mr Colin MTntosh in his presidential address to the Farmers’ .Union conferenc 6 to-day. He expressed the opinion that' New Zealand was such a small community that, independent action ‘would be of no avail, and it was to be hoped that Ottawa might produce a .reliable plan for the Efnpire as a whole. “The idea of a central or reserve bank is a post-war development of the banking system, which the, currency complexities of that period suggested in order to weld national and international banking organisations into ; more or less ' finance-stabiUsing machine,” said Mr M’lntosh. “A reserv e bank would perform the functions of both a notes board and a currency and exchange board. In addition it would ■be able to .-exercise, a gradually increasing .influenc e over the credit situation in New Zealand, and by timely action minimise the 'disturbances which are liable to arise in an unregulated or imperfectly regulated market. Such a bank would provide an instrument for co-operation with the. central banks of .other countries —a co-operation which is becoming of increasing importance and which at present finds no suitable point of’contact in New Zealand. “It is possible, that a central reserve bank might prove merely an additional piece of machinery, and an expensive luxury of little real value. On ( the other hand, it is also possible that it might be the means of providing more effective organisation of credit, and, in normal times, sounder and more stable exchanges. ' : “As you are all aware, our currency is, morel or less, in a state, of chaos, but, being a mer 6 layman, I refrain from constructive criticism or suggestion, as the manipulation of such a delicate machine lies in the hands of experts. •Even the leading economists of the tvoi'l d ''.are 'bewildered at the position into, which our currency has drifted. But what I do maintain, as a layman, is that immediate steps should be taken to stabilise currency, that trading nations may know exactly where they are.EXCHANGE pool. “The action of the Government in oreating an exchange pool was probably determined by stern necessity, but it had the effect of creating Exchange a banking monopoly, and of preventing th© primary producers of this country from selling their exchange—which is their own property in the best market.

“No doubt this has been a form of ’exchange stabilisation, but I cannot help stating that the level of, stabilise-, tion was fixed too low.

“The, banking pool has had th© effect of preventing a natural rise in exchange to the advantage of th e primary producer; and I say that it is. essential in the interests of the primary producer that exchange should rise, m order that he should get a reasonable opportunity /of competing with the farmers in the other exporting countries- of the world. " ■ " “I am convinced that if farming is to be restored ito any semblance , of prosperity ill this country the only immediate hope is to stabilise exchange at 'as high a rate as possible until the financial storm passes, so as to help us to get out of our exchange w’ at our competitors in other parts of the we'd are getting out of theirs. Otherwise if will be impossible for us to continue to compete with them. “Surely it is realised that in* making a (serf of the primary producer we are destroying the only means of this 'omitry getting out of this slump and back on the road of prosperity. I say that such a policy is disastrous, not only to the farming community, but to New Zealand as a whole.”