OUR ECONOMIC PROBLEMS.

Auckland Star, Volume L, Issue 221, 17 September 1919, Page 9

OUR ECONOMIC PROBLEMS.

THE IXUCTTTATING SOVEREIGN. SEARCHING FOR STABILITY. BOARD OF TRADE SUGGESTIONS. (By Telegraph.—Parliamentary F.eporter.) WELLINGTON, Tuesday. 'The Board of Trade's third annual reiport, presented to the Houbc by tlie Prime Minister to-day, is a comprehensive review of the pact year's trade operations and of tlie cumulative factors making for the present economic position. The majority of the details in the report respecting the actual operations of the year have been already published. It, however, eontaine a nunrbcr of policy suggestions and recommendations its a result of the Board's experience and observations, together with a study of conditions nnd influences operating in other countries -which have a valuable bearing on the cost of living problem in New Zealand. Discussing the question of profiteering, the report remarks: '"Any general permanent of anti-proliteerinjr or price regulation applied to ordinary competitive trade would act differentially against those 'industries u'hose profits fluctuate. They would be deprived in tiheir good yean of -part ol ■their profits, and could receive no flielp in their period of had , fortune. Hence in the long run capital and enterprise would tend to desert such industries for industries in w'liich profits were sure and nearly the same every year, but there is no reason to suppose that industries in which profits are fluctuating are socially lc*s desirable than others, consequently this arbitrary diversion of production from channels into which economic forces would tend to direct it would almost certainly involve misdirection ot effort and real loes to the community."

The report goes on to discuss a number of academic suggestions for dealing with monopolies, cost of living and the economic problems germane to it, and then comes to the aspect which was the subject of some interesting remarks in the House last week, the stabilising of the currency in purchasing power.

RESTORATION' FACTORS. The report observes that it is impossible to say now to what level prices will subside, or how long it will take to reach ■that level. Much depends upon the principal policies of the various Governments of the world and upon the extent to which the financing of industry by banks may be carried under Government support. Again, gold circulating currency may be restored, or it may not If it ifi restored prices will reach a higher level than if it is not restored, because a much larger volume of purchasing power can be maintained when all gold is in reserve tihan when part of it is circulating as currency, and the level of prices largely depends on the volume of purchasing power, but whatever be the action of the Governments it iis probable that a fall in prices, which may be delayed for some years, is bound to 'bo experienced. This 'being so, it is evident that money wages that can only just be paid at first, would soon .become an impossibly heavy charge unless pomething occurred to render the amount left for wages, after the payment of capital, much greater than it was before the war." The report proceeds to remark that the accimnilative effect of expanding tho paper currency greaitly widened taxation, and the effect %>i the flotation of large war loans had been to create and •place in the hands of tho Government an enormous fund of punrchasing power without effective compulsion on. tlhe public to limit their own -purchasing power to a more than relatively moderate extent, though considerable restriction of " expenditure had doubtless been effected by voluntary effort. COMMEXDKD TO EARNEST ATTENTION.

The Board, in commenting on Professor Irving Fisher'e proposal for stabilisation of currency, expresses tihe following opinion:—"Th c crux of fche plan lies in the provision for adjusting the weight of gold bullion in the sovereign. Its significance is that to keep 'the sovereign from shrinking in value it Should 'bo made to grow in weight, thus recognising that the depreciated sovereign is a short-weiglit sovereign, and reversely to keep the sovereign from growing in value it should be made to shrink in weight, thus recognising that an appreciated sovereign is an overweight sovereign; in other words, to keep the price level of things in general from rising or falling to make the price of gold fall or vise. The plan assumes, of course, that .a sound banking system is retained or oreated, as -without such system the effect of the stabilisation plan would be quite lost. The plan depends absolutely for its stability upon the possibility of completing a reasonably accurate index number, measuring the rise and fall vn the general level of prices or changes in the cost of living or changes in the pin-chasing -power of the unit of value. So hopeful does Professor Irving Pisivcr's Kiiovj-eeted remedy appear to the Board that we earnestly recommend it to the .seikms attention of the Government."