"OUT OF THE MUDDLE"

Rotorua Morning Post, Volume 2, Issue 311, 26 August 1932, Page 3

"OUT OF THE MUDDLE"

STRIKING ADDRESS VISITING SPEAKER TACKLES DOMINION'S MONEY PROBLEMS. CURE FOR THE SLUMP. Stating that nothing more important than what he had to place hefor.e Rotorua could possibly be under review anywhere that (Y/ednesday) evening, Mr. A. E.Robinson .proceeded to address an audience presided over by Mr. J. W. Wrigley in the Peerless Theatre, on the state of affairs in New Zealand and in the world. He showed that the slump conld only reach New Zealand through trade with other countries. "Were the Maoris still in possession of the oountry and not in touch with the outside world, there would be no slump. Th'e depression was not 'caught, lilce the measles'," said Mr. Robinson, and proceeded to show that actual physical production for export had incrcased by at least 50 per cent. in cheese wool, meat, and by more than sixfold in the case of butter, since 1920. "How is it," the speaker asked, "that on less land, with less persons to pay, and with such huge increases of goods, thc producers were virtually hankrupt?" The reply would he made that prices had dropped. It was true that prices were down, but not much below the 1914 level. Prices in money should have nothing to do with it. Exchange of New Zealand pro&ucts in imported goods was much better than in 1914 British money had no relationsl'ip. to New Zealand money, the British pound was not the New Zealand oound and it was a misfortune that hoth money units had the same name. This misled people.

N.Z. a "Big Farm." Our exports were sent to Bri+ain, converted into British money and that money bought our imports, which were then sold in New Zealand money at much above the British prices, ertainly at twice the British retail priee. For instance, £100 of British clothing had to be sold for £212 in New Zealand money to yield 10 per cent .profit. It was on the duties, handling charges, profits, transport, commissions, etc., from this trade that the people of New Zealand ehiefly lived. If it were not for the grass, there would be no New Zealand. "New Zealand is a big farm and the p?ople of New Zealand cities eat grass. live on grass, and wear grass,' declared the speaker.

The reason why New Zealand was in trouble, he said, was because of the alteration in the purchasing power of New Zealand money, mostly effeeted by legislation. Whereas goods "ent abroad and sold would buy abroad for 16s or less what cost 20s in 1914, when those goods were brought to New Zealand they were raised to the equivalent of 26s, against 20s in 1914. The country was back to 1914 prices for exports, but not to 1914 costs internally, all other internal costs having risen even more than imports. Cost Reduction. For many years he had been advocating reduction of costs. The Auckland Farmers' Union engaged the Town Hall in Auckland, advertising a monster meeting, to warn the people of what was coming through Britam's return to the gold standard and its effect on prices of New Zealand's exports. That was four years ago. No notice was taken, the people would not listen. But the Government was now t-ying to put into effect the plan which Captains Colbeck, Rushworth and others had for years in vairi attempted to induce it to put into operation, the plan of reducing costs, a plan which could have succeeded when Mr„ Massey, after the war, had the equivalent of about five years' prewar taxation in the Treasury, with which to reduce indirect taxation, and bring down the level of costs, or up to 1929, when incomes paying income tax rose to £69,000,000, but which it waa impossihle to make effective under existing eonditions, when nohody had any money. Civ'ilisation in Danger. The speaker quoted world-wide authorities to show that civilisation itself war. in danger, that world trade was decreasing with terrific rapidity. He said that up to 1929 world production had increased without dangerour surplus, but that since that date, to last September, production had slowed down by 25 per eent., while surpluses were much greater. The deterinination to keep trade for each countiy's nationals, to sell without buying, had caused a drop in world trade quoting latest League of Nations' statistics) of no less than 60 per cent. This was an indicaCon of impending aisaster. Fortunately, at a price, New Zealand, one of the last countries to be hit by the slump, was getting rid of most of its products. This slump &nd the consequent want, misery and stavvation, were e?sentially the result of surpluses, and Mr. Robinson quoted evninent authcrities to show that the real trouble was merely lack of media i f exchange. The East European group of countries had mostly coneluded barter arrangements with each ither and with France, and new barter treaties were coming into existonce rontinualiy., The impending crash could not be averted by New Zealand. New Zealand could get out of the way as much as possible: It had to be borne in mind that this was not a erisis of scarcity, but essentially one of maldistribution through the faiiire of money. Numerous world-known economists and statesmen were quoted to this effect. Mr. Robinson traced tha trouble back to 1920, when world-bankers decided on a return to gold and when the British Cunliffe Committee gave the same advice, put into effect by Mr. Winstone Churchill, who, with Sir Robert Horne, late Chancellor of the Exchequer, had recently 'emphatically repudiated their earlier actions, and had blamed the experts. Up'to 1920, the ratio of bank notes to production in the Dominion had been rising and j in 1920 the pereentage was 8.5. By 1929 "when the camel's back brok.e,"Sc the pereentage of notes to production fit

was down to 5.1. Notes were the small change of business, holding, however, a definite relationship to ch'eques, etc., so that they were a clear indication of what had happened. Sir Robert Gihson was quoted to show the control of the banks, — "His bank had command of the nobe, issue and could create eurrency resources to any extent deemed advisable," and the Macmillan report, with the Right Hon. Reginald McKenna, ex-Chancellor of the Exchequer and chairman of the Midland Bank, was quoted to show that banks , created deposits hy loans, rather than | lending deposits. _ The. lecturer showed hy illustrations that money issued to a borrower was a liquefying of his securties and a charge against all the goods and services and not in any sense a. call on the hank itself. CamouflagedETaxation. Instancing the recent £2,500.000 loan to the Government, he stated that this was rea-lly camouflagad taxatio. on which, however, the State would pay interest to the hank. Mr. Robinson next asked what would put the country right, and replied to his question, that good prices for primary products would set everybody right by providing the necessary pu •- chasing power to set the wheels of business in full operation. If the prices were only a hoax, it would be just the same, provided the necessary" credits were issued. Everything would go on as in a good year, unemployment would cease, normal taxation would be ' raised, goods would go from the ! shi&lves and all would be as it had i been. j To set things right it was only ne- i eessary to issue through the ba^ks i the necessary credits to farmers and J others exporting. The banks would not I pay these, indeed they would reeeiTre I the payments in other accounts as the ^ original recipients paid their mort- | gagees, storekeepers, etc. Aetually, ! the_ banks would have the values of ! their securities restored, whereas to- ] day they are worth' little or nothin0, i

State Bond. If the State gave the bank a Lond, as acknowledgment of receipt, to halance the books, this need not be negotiable nor interest-bearing, and it would he suffieient to pay to the banks merely the cost of the bookkeeping. Such bonds could he wiued out when higher prices came, or'ces being stablised at some reason able level. External credit would he strengthened, as interest is paid through exports and whatever tends to improve capahility to export improves ahility to pay interest. The new money necessary to restore to farmers wh'at they had been depvived of through high internal costs would not mean inflation. The Government could not tinker with such credits, as they would be strictly anchored to production, and fresh credits being only advanced as production increased. It meant cutting out the intermediary and imaginary gold and basing the country's money on exported products at world prices, first restoring export prices to what they r^ally ought to be as a result of what the country aetually got for exports in imports. Nothing was asked for *hat was not strictly fair and nothing that could hurt any class, but rather what would immediately benefit all classcs. WithoUt something of the sort, export would cease through inability to produce at a profit. The present money system was a relic of barbarism, but could not be destroyed without ruin on every hand. Mobilisation of national resources in face of very imminent p'eril was needed. The country should not blunder on, doing nothing. till disaster overtook it and it should not leave such' trouble as it had experienced in this generation as a legacy to the children. At the conclusion of the meeting, Mr. Robinson answered a number of questions to the satisfaction of the questioners and was accorded a vote of thanks hy acclamation, a similar compliment being paid to the chairman.