NOT NEW IDEAS

Rotorua Morning Post, Volume 2, Issue 412, 22 December 1932, Page 6

NOT NEW IDEAS

FRANK

COLBECK.

To the Editor. Sir, — I want to criticise the last paragraph in the leading article in your issue of to-day, December 17. The paragraph reads as follows: "It is the low world level of prices that is proving so oppressive to New Zealand, and we cannot change that by practising little inflation sehemes of our own." I disagree entirely that low prices ever created a depression. It is disequilihrium of prices that creates the trouble. So long as a "Worker" can sell his labour for the commodities and services that enable him to live in eomfort, the money he gets is - quite unimportant. In other words it is not the amount of money but the amount of commodities and serviee that count. All trade is barter, and if the produce of the farm can be exchanged for manufactured goods and services and leave a profit to both parties to the exchange, then all is well with trade. If the exchange leaves one party to the exchange with a loss then trade is bad. At present the farmers' prices are roughly 18 per cent. below the 191314 level, but the prices of manufactures are 40 per cent above 1913-14 levels. So long as this state of things continues, there can be no prosperity. Cheap money would be of very little use in putting things right as far as exchange of goods is concerned. Cheap money is helpful in redueing interest rates on long term debts, especially national and local body debts, and in this way reduces rates and taxes. I have not included any benefit in the case of mortgages becaus-e, when a farm or business is not paying, it is almost impossible to renew a mortgage. Unfortunately at present very few farms or businesses are paying. Cheap money is useful when your business or farm is showing a profit, but it is no use when you are showing a loss. Suppose the Government were to have ten million £1 notes printed and gave them to the banks to be issued under present hanking methods. What good would it do. You would have to lodge security and show that your proposed enterprise would pay. We are not short of money for production, but we are short of money for consumption. The trouble is to know how to get the necessary extra money into circulation. I dealt with the "High Exchange" method in a previous letter and, although it is better than nothing, I do not think it will see us out of our difficulties. The Bank of New Zealand has proposed a subsidy of £2,000,000 paid 10 the farmers plus a reduction in rates. Supposing the total relief amounted to £4 million — the farmer is over 26 million pounds short. What good would it do ? A little but so little as not to count. Interest would have iq be paid on the £2,000,000 subsidy and the rates would have to be paid oUii of the Consolidated Fund from .ncreased tapcation. But why should we not have a larger "subsidy" and why should we pay interest on the subsidy. Suppose che banks were to offer to lend the Government £20,000,000 at one per cent, the Government to guarantee ropayment of loan as well as interest. Would you say that was sound or orthodox? If your answer is "Yes" then why not go one step further and allow the Government to itself issue the loan, free of interest Where do you draw the line? The Government, that is the people of the Dominion, are answerable in any case. Why employ an' agent when the Government can do the work themselves equally well and at 110 cost to the Dominion. Under my plan you have restored equilibrium. Of course ' you must guard against a rise in prices by a manipulation of the customs tax and exchange charge. You will probably remember that silly old lie "We can do nothing without international agreement." Surely the world is to be put right some nation must give a lead? New Zealand has given a lead to the w'orld before to-day, why not again. Suppose the "plan" is a failure, what great harm have we done? How can an issue of worthless credit seriously injure us? What do you suppose will happen if we let things drift? Wool at an average of about 6d; meat at an unpayable price and butter will shortly be sixpence per lb' if not less. It is not a question of helping the farrner, it is a question of helping the whole Dominion. What is the use of painting,» the roof of a house when the foundations are absolutely rotten. The foundation of trade in this Dominion are the primary industries, if they are not looked after the whole structure must eollapse. — I am. etc..

Morrinsville, Dec. 17, 1932.