MONEY VALUES

Rotorua Morning Post, Volume 2, Issue 313, 29 August 1932, Page 7

MONEY VALUES

CANTERBURY COMMITTEE SUBMITS CURRENCY . SCHEME. MAINTAINING PRICE LEVELS A resolution that, sinking minor differenees of opinion, the North Canterbury Currency Committee recommended that steps be taken to raise the general level of wholesale prices in New Zealand to about the 1929 level by means of concerted monetary action, and that general prices be thereafter maintained at that level, was carried at a meeting of the committee. A plan for th'e economic re-estab-lishment of the Dominion by means of the control of the usable value of money was submitted by a sub-com-mittee, but consideration of its findings was deferred. Mr. L. R. G. Macfarlane outlined this plan. In finding a remedy for the present financial position of the Dominion, the first thing to do was to restore the confidenee of the people, he said. "We have not the power to restore prices, but we do have the power to reduce th'e value of money by reducing its selling price and so bring money and prices more on a par." The Proposed Plan. (1) After the conversion of all inbernal State and local body loans, representations be made with a view to the conversion to a lower rate of interest of all external loans, according to the fall in prices. (2) The appointment by the State of a Currency and Exchange Control Board, having a definite charter giving the State power to appoint, but leaving policy matters to the board. (3) Control exchange up to level sufficient to remove partly the disparity between exporting producers' returns and internal costs. (4) Regulation of tariffs so as to prevent the increased exchange from increasing the cost of living. (5) Legislation to reduce the lending and borrowing rates of interest of the banks and other lending institutions. (6) The Currency Board to be given authority by Parliament to create several millions of emergeney credits. (a) Half of this sum to be lent to the banks at a very low rate of slowly increasing principal and interest, on the guarantee from the banks that this money would be lent at an equally low rate to farmers for the specific purpose of increasing or cheapening their production, and to secomfary industries of a national character, provided they can sh'ow that by rationalisation they can increase production employment and consumption without immediately increasing th'e cost of living. (b) The other half to be lent to the Government on the same tenns for development purposes that will immediately increase or cheapen production and absorb the unemployed. (7) The future policy of the board to be in adverse ratio to the fall and rise of export prices. On prices falling the board would, by eontrolling its reserves and fixed charges, lower the rate of interest, so stimulating trade and, with rising prices, act in the opposite way. Reserve Bank. Mr. J. R. Corrigan, a Taranaki dairy farmer, outlined a scheme for the establishment of a Federal Reserve Bank in New Zealand which would purchase the whole of the exports at 1929 prices and issue currency to that extent. The functions of the bank, which should be entirely free from political control and should have a branch in London, would be to issue currency against wealth produced, and to control the currency internally and externally. It would mean that, if the goods purchased were worth £50,000,000 on a 1928-29 basis, that amount of currency would be issued, even though the goods might be worth only £35,000,000 in London. The bank would arrange for the payment of New Zealand's interest bill in London and for the issue of credit in London for importers.