THE DEPRESSION

Rotorua Morning Post, Volume 3, Issue 627, 4 September 1933, Page 2

THE DEPRESSION

CAN IT BE CURED CAPTAIN COLBECK ADVOCATES j RESTORATION OFj PRICES. GOVERNMENT PURCHASE. Capxain F. Colbeclc, of Morrinsville, the well-known Farmers' Union leader, writes as follows. — In my opinion the present' depression is due to one cause and one cause only, and that is- the disequilibrium in price relations. In support of this contention, I quote from the July Letter of the City Bank of New York. "From the start of the depression the ratio between what a farmer sells . and the price of wh&t be buys deelined [ and during the most of the last year 1 it has been only about one-half of what .it was in 1910-14; and, of eourse, with each unit of his production the farmer could buy only half as much ' of the products of other classes of the population. This is an explanafcion of the decline in the demand for manufactured goods, for the falling off in factory employment, thus fur-' ther redueing the demand, and so for the whole vicious circle of the depression." Aguin he writes: "Since in the final results all business consists of an exchange of services, it is evident that the trouble is in the exchange relations. Everyone buys with whatj he sells and alth'ough the economic system consists of a multitude of independently-owned units, they must work together as a harmonious whole to have prosperity." The Only Cure. If the trouble is as state.d then the only possible cure is to restore equilibrium in exchange values. This can be donef by either redueing the high prices or raising the low prices. If the equilibrium had come about naturally it would mean that there had been over-production on one side and the cure would be to reduce this production on the excess side. This*claim that there is over-pro-duction of primary products will not stand examination. There are over 40 million people unpmployed, and, with' their dependents, there must be at least 120 million who are not fully fed. Until these 120 million are properly fed it cannot be claimed that there is over-production of food stuff s. Price Equilibrium. After exhaustively reviewing trade figures and price relations and commenting on various proposed remedies, he concludes: The third plan that I would suggest is as follows: — The year 1929 was probably the most prosperous year that the Dominion has ever seen. Prices were high' and were probably nearer to an equilibrium that at any other period in the Dominion's history. I suggest that we artificially restore the conditions of 1929. The method would be to fix customs duties so that locally manufactured goods could be sold at 1929 prices; the Government to buy all the exportable produce at 1929 prices. The Government, having bought the exports, would sell them in London for "sterling." The Government would use the money obtained to (1) pay interbst owing on loans; (2) to buy British goods required in the Dominion. I propose that the money paid for exports be notes issued by the Government, the note issue to be ' limited to the amount required to pay for exports. To avoid inflation and the raising of prices, I propose that these notes buy "sterling" at par, th'e notes used to buy "sterling" to be immediately destroyed. If currency became too plentiful the Government would increase taxation and use the surplus income to buy bonds. If currency were insufficient they would issue more notes and buy up their own bonds. The plan I suggest has been adopted by the Egyptian Government and has been in successful operation for some years. It is quite possible that the Government would not have sufficient "sterling" to supply the demand, in which cases they would have to restrict imports of luxuries.