UNKNOWN COST

Hokitika Guardian, 24 January 1933, Page 5

UNKNOWN COST

OF ARTIFICIAL HIGH EXCHANGE.

THE NEW ARRANGEMENTS.

(Par Press Association — Copyright.)

WELLINGTON, January .23;

The price which the Government is to pay for the artificially high exchange rate'—the giving of an indemnity to the banks —is causing lrauanescmen and politicians outside th© Cabinet grave concern. As far as they can see, it moans that the Government is entering into a liability of an unknown amount.

According to one financier, the operation of the system, will depend entirely on the .amount of New Zealand credits in London.. These credits are the. difference between the amount paid for New exports and the amount required for imports to the Dominion, plus the requirements of th e Government and local bodies to meet interest charges. If, after the cost of import® is met and the interest bill® paid, there is a, surplus, it will he the business of the banks to dispose of it. This can be done by selling the credits at the heat price which they will bring. F'or example, 'a Japanese firm doing business with the Dominionmay require a credit and may purchase some of the surplus Any lows which the banks suffer through this will have to he met by the Government. Another method possible is- for the Government to arrange to pay off part of its own debts with the surpluses and then arrange for the amount to Ve a debt due to the banks in New Zealand. It has been estimated-that the increase in the exchange will cost the Goverurnent and local bodies another £3,000,000 annually in order to meet their interest bills. It is considered p'v.sible that Esses in London surpluses may run into another £1,000,000 niUfrough no one cares to make a definite forecast, ais ' there is no basis on which the losres may be estimated 'for no ore yet knows the value of this seal son’s exports and the amount required for imports.