"SET FOR RECOVERY."

Auckland Star, Volume LXII, Issue 125, 29 May 1931, Page 9

"SET FOR RECOVERY."

THE ECONOMIC STAGE. PROFESSOR TOCHER'S VIEW.

CAUSES OF THE DEPRESSION,

The opinion that the economic stage is set for recovery was expressed by Professor A. II Tocker, of Canterbury College, after an address to members of the Canterbury Advertising Club. The country would gradually emerge from the slump, and should make a move toward guarding itself against future difficulties •

Professor To'ckcr said it was customary to commence such an address by briefly relating the facts. Before the war and since it bad been customary to average out prices by index numbers. Thus, in 1924, prices had been 50 per cent or 00 per cent higher than prewar In 1928-29, prices had fallen to 40 per cent and they were now round about pre-war levels. There had been a drop or from hajf to a third since 1928-29. There was the same movement in share prices, which had fallen from a quarter to a half since 1029. There were 8,000,000 unemployed out of a population of 120,000,000 in the United States and in Great Britain there were 2,500,000 unemployed out of 40,000,000. Government revenues had fallen and deficits were expected generally. New Zealand was not really as badly off as other, parts of the world. As Bad As 1920-21. The present depression was as bad as that of 1920-21 and more serious than any other since the 'nineties. • It was also- entirely unexpected and had fallen on the world out of a blue sky. The fall of prices had been greatest in such raw materials as wool, cotton and rubber. For this, pooling schemes had been greatly blamed. Surplus , production had also been blamed, but one man had replied to that theory by stating that there could be'no such thing as surplus-production until every Hottentot was a millionaire An impeded process of exchange had also been blamed, and it had been suggested as a remedy that the process of exchange should' be still further impeded. The rationalisation of industry had resulted

in cheaper production costs and the low cost production countries were selling at rates that could not be followed by the high cost countries, witli the result that there was a slump in the countries that were being undersold. Owing to political instability it was difficult to guess what was going on in Europe, but there was danger of war and the Continent was unstable. People were uncertain of the position and their confidence in the future was low with the result that people with money were unwilling to venture it. Bank Funds Not Contracted Inflation had caused prices to rise to extraordinary levels and many people thought that the fall must accordingly be due to deflation, but'that was fallacious reasoning, as the banks had not contracted their funds. A shortage of gold was also blamed for the depression, but an examination of banking figures for the world would .show that such was not the case. Another explanation put forward was the maldistribution of gold, but the Bank of England had arranged to compensate for all gold exported. It was also a fact that the depression was as serious in countries where the gold was accumulated.

It was a fact that only part of the world's money was used in production and industry, and that part was now smaller than in the past. In the period 1921-29 bank deposits in the United States had increased. Prices generally had risen about 3 per cent, while share prices had gone up about 400 per cent. The money had gone to expand speculation. Frozen Assets. The banks' deposits in New Zealand had not decreased, but the customers were refusing to use their money in their businesses. Unable to lind safe avenues for investment, they left their funds in fixed deposits for the bankers to invest. The result had been that the money had found its way into frozen assets, and circulation'had slowed down. As" those assets were released for circulation, the country would emerge from the slump. <: It is not the money that is the cause of the depression, but the manner in which the banks' customers use it," Professor Toeker said. "The stage' is set for recovery, and, when it comes, there will be all the money necessary to sustain the rise in prices that will follow."