THE WAIKATO TIMES With which Is Incorporated The Waikato Argus. TUESDAY, MARCH 25, 1930. FINANCE AND TRADE.

Waikato Times, Volume 107, Issue 17978, 25 March 1930, Page 6

THE WAIKATO TIMES With which Is Incorporated The Waikato Argus. TUESDAY, MARCH 25, 1930. FINANCE AND TRADE.

The last fall In the discount rate of the Bank of England is a further indication of the condition of the money • market and of the anticipations of those who control the policy of the Bank. It was prophesied hy authorities more than a year ago that interest rates were likely to drop, and this would probably have taken place some time ago but for the American Stock Exchange boom, which gathered up so much of the world’s loose cash in order to buy shares at fancy prices. It‘is unfortunate that the main reason for the low rates for money is to be found in a general depression of trade, which has lasted for some years. Until recently America seemed the one exception to the general condition, and now that country seems to be involved in the general fate. Money is as plentiful and as cheap in New York as in London, and unemployment is as rife in America as in Britain, with much less organisation for dealing with it. The regrettable thing is that we in New Zealand are not* to participate in the advantages of cheap money, although there are few countries where it would be a greater benefit. It would be of value if we could know the reasons for the depressed condition of trade and industry. Undoubtedly the destruction of wealth due to the war was a great factor a few years back, but the position to-day is that there is a surplus of every important line of food or of raw produce, while at the same time money is so plentiful that rates have fallen very low. The demand for manufactured goods is no better than it is for raw produce. Some evil influence prevents the exchange of manufactures for produce. We can all sec some of the causes, in the difficulties created by tariffs for the exchange of goods. Each country suffers from these difficulties and resorts to protection in the vain hope of improving matters, with the result that matters become worse. It may be that currency troubles are even more responsible than protection. Although we never see gold, the credit policy of all the more important countries of the world is based on gold. If from any cause the exchange reduces the value of the sovereign below a certain figure gold will be drawn from the Bank of England to settle the balance. IC the Bank’s sLock of gold falls to any extent the Bank rate will be raised to attract money from elsewhere. Oilier banks have to follow the Bank of England, and with the knowledge that money is tight they become conservative in making advances, business is checked, and prices fall. For I he past four or five years prices in Europe have been slowly falling and at such limes trade is always bad. The disturbing factor in the situation is that there is no imme-

diate prospect of any change. The world’s output of gold does not meet the increasing requirements of the world. All the authorities recognise the difficulty, but at the same time they fear to recommend a currency based on paper. The economics in the use of gold and the extension of credit during the last 70 or 80 years have been enormous, and even then they are not sufficient. It may be that the Royal Commission appointed at Home to enquire into banking and currency will throw some light on the difficulties, but naturally it is in Britain that the chief effects of any recommendations will be felt, although trade has become so international in character that a reform in one country only is limited in benefit. We sec to-day that America and Canada are engaged in an immense hold-up of wheat. In spile of this the price steadily drops, and it seems probable that the wheat will be finally sold for less than it would have fetched after the harvest. Meanwhile trade is disturbed, the transport of wheat is delayed, and railways and shipping suffer. It may be a perfectly legitimate proceeding 10 hold up wheat for a belter price, but at the same time it is usually a very misguided proceeding. The international character of trade ensures that if one country stays off the market oilier countries will step in to take its place. Governments in order to curry favour with special interests grant them favours. In America the Government is finding money for the farmer to enable him to hold his wheat. Much of this money will probably be lost, and the farmer will not benefit in any way. The Government have no faith in the method, but do it lo placate one interest, and so long as such things are done we must expect hard times. In our own country we protect wheat and flour. Wheat is selling at 5s 8d in New Zealand and -is Gd in Melbourne, and at the same Lime we see proposals to develop poultry and pigl'arming, though this cannot be done with foodstuffs inflated in price to such an extent. These errors on the part of politicians are to blame in some degree for hard times. The bankers are probably carrying a policy which may be good in itself to unwise lengths. They have carried many enterprises with the hope that times would improve and the account turn out ultimately sound. It is a prudent and a kindly policy, but it may be carried too far, and unsound businesses may be kept afloat to prevent any real improvement in the industry. Combines to fix prices operate in much the same way; the prices arc fixed so as lo enable the weakest member of the combine to survive, and this means that the efficient members make undue profits and the public suffer. We are badly in want of a new currency policy, but in the meantime we might reform a number of unwise methods, which together do much to increase our troubles.