AUCKLAND NOTES

Hokitika Guardian, 26 November 1932, Page 6

AUCKLAND NOTES

(From our own Correspondent). AVe get some - fairly large vessels here occasionally the largest so far having been the Carintma 20,.1 ? 7 tons, 'the report that the famous Atlantic liner lYiuuretania would probably nail here ,shortly on a world cruise which the Cunard Company is organising, has created considerable interest. The report has not been verified, but it would be' very interesting to see this 30,bad I toil Cunarder in p~rt. tehe is 762 feet long, with a beam of 88 feet and wou.d completely dwarf anything we have seen here so far in the ,way of merchant shipping.

There was quite a flutter of excitement this weoK when it Was reported some thirty Members of Parliament were about to present an ultimatum to the Government to force the hands of the bailies to raise exchange to 25 per cent. Possibly some- thought this matter was going to be rushed through Parliament in ail all night sitting, as was done many years ago now with the guarantee, that averted a banking crisis and sawed the Bank of New Zealand. Of course the conditions were absolutely different and tie reassuring news was soon spread that the Government would' not be stampeded into any action which had' not been carefully considered by their banking and financial advisers. The return of Mr. Downie Stewart and Mr Park this week, however, is eagerly looked for, as undoubtedly some very drastic steps will have ;fo be taken' shortly to relieve the present intolerable situation.

Discussing tile situation with a retired banker the other day, he admitted the monetary position in New Zealand was unique in so far as the gold reserves held against present note issue were equivalent to 120 per cent., whereas the Bank of England only held about'4o per cent. And yet our notes w’bre at a 10 per cent, discount as compared with sterling. He could see no reason therefore, why the banks could not, if required, largely increase the note issue. But the conditions under which this increased currency could b© put safely into circulation would have to be very carefully considered." •The initiative would rest probably with the Government whioh would have to .'stand behind such issue /as it could only be made as against Treasury Bills, bonds or other securities which the banks would on their part be prepared to accept. That wsfs probably the chief reason for the proposal that there should be pne central bank controlling the note issue, and therefore, being in a position to stabilise exchange, and prevent its rising unduly as would.be the case if these precautions were not taken.

Jt might he pointed out that to artificially raise the rate of exchange is to' voluntarily and 1 deliberately incur the penalty which wouldy have overtaken us fast enough if we had repudiated our debts, maintained our adverse trade balance, put into power an irresponsible Government, or made no attempt to balance our budget. Exchange would then have soared like a balloon. Having however, striven 1 hard to maintain our credit and the value of our currency, to wilfully depreciate cur pound to 15/- (or 9/4 in Paris, Berlin, or New Yotrk) and add about £2,500,000 a year to local body and Government indebtedness, is surelv delirium brought about by a surfeit of indigestible economies.

iour ! farmers' must have relief—in fact we all must. But the relief must be permanent, and not merely the temporary stimulation which inflation ,’can give. M°ro money must undoubtedly be put in circulation. If existing credits on which currency is based have become “frozen” through Ices of confidence by investors, fresh credits must be established, and further currency issued. The best relief for the farmer would be for the Government to take over some of the surplus land .which ho cannot profitably work, and establish .settlers on it—as far as possible on small holdings. This would require money, and if this cannot just now be obtained by an overseas or internal loan, long dated and at low interest, the Government could issue bonds, the security behind which would he the land purchased. Againt such bonds either the Associated B oT, k.s or the proposed Central Bank could issue currency which would immediately pass into circulation.

Practically all money i« now paper ond it depends entirely on the conditions under which this is issued whether it will retain its value or not. Jf issued with the sanction of the ibn.nks (who after all are only our responsible financial advisers), and lor legitimate requirements it w>ll retain more or its face value. Tf issued by any Government simply in accordance with the dictates of political expediency it will be cbm e worthies, ar r ' the credit of the country issuing it would collapse.