The PUTARURU PRESS, THURSDAY, APRIL 3, 1924. FARMERS’ FINANCE.

Putaruru Press, Volume II, Issue 25, 3 April 1924, Page 2

The PUTARURU PRESS,

THURSDAY, APRIL 3, 1924. FARMERS’ FINANCE.

Pfliee ... Main Street Phone 28 - - P.O. Box 44 |Lewis, Port*B and Dallimore's Buildings.)

- AT the last meeting of the Moninsville branch of the N.Z. Farmers’ .. Union Captain Colbeck made the , statement that “ the way out of their difficulties was cheaper money.” He said further that the difference betwecn 7 per cent, and 5 per cent, meant £6,000,000 annually to the fanners. Whether these figures rep...resent the exact amount or not is beside the question, but they are sufficiently accurate to illustrate the evil effects of high interest- Money at 7 per cent. c.i. doubles itself in 10 years and at 5 per cent, it doubles itself in 14 years and three months. . Even at simple interest of 7 per cent. »money doubles itself in a little over 111 years. That is, the borrower has jifaid it all back and still owes it, and jffepeats the same process for the ■ succeeding 14 years three months ad ■ infinitum. Take Denmark for inBstance. At the beginning- of 1918 the Efaitners’ co-operative credit banks Ptiad bonds circulating amounting to r over £100,000,000, the average rate of interest being 3S to 4 per cent. Now let the method adopted by the New Zealand Government of paying 1 percent. into a sinking fund, which rei deems the public debt in a little over k 36 years, be examined for a moment, is exactly the method adopted ■*"J7y Denmark and a dozen other countries in the operating of co-operative land banks. From the last illustration of the amortization of loans, that is by paying principal and interest by Is yearly, half-yearly or quarterly payments of both, the whole debt is not only gradually extinguished, but a regular flow of new capital is thus provided to meet new demands for loans. This system is not at all hard to understand by any farmer. But w-hat will require a lot of explaining is why when money was going- begging in the London market two years y ago at 4 per cent, (and even at 3 per BJ~for British investments) suffiwas not borrowed to pay off all private mortgages where the interest Tate exceeded 7 per cent. Obviously that would not have increased individual indebtedness, and it would have freed enough money to have met the —ttb/normal demands for commercial Credit due to the compulsory over- ;; importation of 1920-21. It should perhaps be explained that about 20 million pounds worth of stale or overdue orders for British goods were forced on New Zealand at peak prices—the banks had to meet the . payments, and as usual the people eventually had to pay the piper. These simple facts help to explain some of the main factors which caused the slump. Another was the 7, 8 and even 9 per cent, debenture bond issues in which numbers of big mercantile firms dealt, guaranteeing the above rates free of income tax. The merchants were able to put this interest, etc., on the price of the goods, and the business firms were so well organised that they were able to pass the extra costs and taxation on to the T people. The farmer who depends on I the world’s markets for prices can do nothing of that sort, nor could he hope to succeed paying such rates of interest. As Captain Colbeck says:— “ With such interest it was impossible and it would be better for them to walk off their farms.” As one writer has put it, without any predilection for any political party or leader : “Words fail to express the utter astonishment at the lack of vision on the part of leaders inside and outside of the Government” Last week, it is true, according to a paper report, the leading lending institutions of Auckland made statements regarding the gravity of the conditions of farm finances, hut these conditions have existed long enough already to cause the utter ruin of many deserving settlers, and even the creditors and Official Assignee have given their sympathetic testimony to that fact. Besides farms are lying idle in all directions and that cannot be due to “ inflated prices ” or to the fact that there are “ two or three mortgages becoming due ’’—seeing that, many of These farms have no mortgages now. Summarised then it is an economic truism that “ it pays the country best to lend for productive purposes, because money so used enormously increases the security and the ability to pay.” It also tends to lower the cost of living by creating abundance. On the other hand all loans for nonproductive purposes add to the cost of living and to the taxes. Of course * this does not apply to roads or necessary railways or other public utilities ; wbjchfacilitate production, and thus {kkc the cost .of living, .■tadnrenc;-, -urb h • - iSfewU'l', jl Bbt tk

that the basis of our prosperity is not endangered or injured by diverting the people’s money to investments of secondary importance. As Captain Colbeck put it, “ let the farmers speak with one voice,” instead of an occasional growl with many a discordant note, and we may hope for a brighter future for tile men who produce 93 per cent, of the wealth of this country but who have neither time nor inclination to rightly appreciate the men who fight theneconomic battles for them—for the country’s sake.