THE COST OF LIVING.

Press, Volume XLVIII, Issue 14380, 13 June 1912, Page 10

THE COST OF LIVING.

(By J<>. W. Mcli.nAiTH, LL. B., Litt. D.) (SPECIALLY WTIITrKN FOP. "THE VRKSS. , '). We have seen that wholesale prices fell rapidly -from 1370 to 1895, and thence rose with almost equal rapidity; wo have soon also that the rise has heen, on the whole, greater in farm products than in imported Roods; we noted that the period of falling prices was one of an enormously high bankruptcy rate and of a fast-declining marriage rate; and •• finally we j found that after prices began to riso in 1895. the bankruptcy rate dwindled almost to vanishing poTnt, while, in the same period tho marriage rate jumped nearly oO per cent; and wo drew the conclusion from these, records of the bankruptcy and marriage barometers, that lile, as a rule, must be much more pleasing during a period'of rising, than during one of lulling, prices. Before we can realise the true significance <•!' these changes in the price level, we must take into consideration the industrial nature of our country. Now,'it may bo safely as-scrted that, in spite of all "our Customs tariff* and industrial legislation, New Zealand remains, as it always has been, a farming community. It our total export trade, between SO' and 90 per cent., consists of the product* of the soil, our prosperity then should be ba&ed largely upon tho price of our farm products. Statistics show conclusively that such is the case: the marriage and the bankruptcy rates indicating that when farm products were falling social gloom and commercial disaster overhung the community; and then when farm products were rising, hope and prosperity were dominant. Bitter as was the struggle between 1880 and 1895 (and its bitterness may ako be gauged from the fact that bctw.vcn 1885 and 1891, l>o.ooo more people left New Zealand tbau entered it) it is almost inconceivable what tho state of affairs would Jiave been had not im- ■ ported goods also fallen"in price. This fall mitigated, to a great extent, the terrible severity of thesd times. When in 1895 farm products began to rise, imported goods continued to fall. The success of tho refrigerating process enabled our farmers to hend their meat, butter, and cheese to the other end of tho -world; tho appointment of Government graders improved the quality of these commodities; tho progress of invention quickened, and cheapened transport and communication. is it any wonder thoa that with whatever, we sold growing dearei, and whatever we bought growing, cheaper, New Zealand entered •' upon an era of unexampled prosperity; a prosperity that filtered down from farmer to merchant, from merchant to manufacturer, , and from manufacturer to artisan? During, tho last ten years, however, though farm product* have continued to rise, imported goods have risen also. The extent of this rise, and the possibility of imported (i.e.. manufactured) goods rising as rapidly as raw products, will bo discussed in another article.

At first blush.the preceding facts appear to indicate that the farmers suffered most prior to 1595, and that they afterwards enjoyed a greater degree of prosperity than any other section of the community. To.some extent this is true. Wherever farmers retained possession of their holdings throughout the period of rising prices, great gains have in many, eases been made. If they have not already made largo profits by selling their farms, they are still in possession of an asset worth, in many cases, anything from 100 to 1000 per cent, more than they gave, for it, Dur-. ing th©"recent land boom thousands of properties changed hands; large profits .woro reaped, a largo proportion of which was wholly unmerited. It would be interesting to discuss the position of those many thousands who bought this •'inflated" land. It is safe to assume that under tho stress, of competition," flavoured with the-ex-citement incidental to a boqiu, the full market ..price .has boon paid tor most of this land; in other words, the price has been so hi&"<i tliat the margin of profit left to thp faraior after paying wages and interest, is just sufficient to induce him to , continue farming. The situation is a critical one. All farm products have not risen equally in price.' Cereals appear to be as uncertain in price as they are in' yield- Tho rise has been mainly in animal products, particularly in butter and cheese. Hence tho prosperity of a large parfc of the farming community, notably that portion devoted to pasture ratlior than-to agriculture, and to cattle rather than to sheep, has a foundation no more solid than butter fat. I leave to the imagination of my readers tho sitxiation of those dairy farmers that have paid from £40 to £70 per acre for land in a climate wholly unsuited to tho growth of cereals, a.nd but ill-adapted for «e----pasturing sheep, should there occur a serious and continuous decline in butter-and cheese. It is only tho older generation : of farmers who remember the terrible price the farming -community paid for indulging in the famous land boom of tho seventies. Will history repeat itself!' liut it is now time to ascertain tho cause of tho remarkable fall in prices prior to 189"), and of the equally remarkable rise beginning in 189G, and still in progress. ] think my readers will agree with the proposition that the more money one has, tho higher the price ono can afford to pay for goods. Double your money (or spending power) and you can afford double the price. But if at the same time as you doublo your money, you also double tho* amount of goods you wish to buy, you will bo able to afford only the original price. So it is with a country, and indeed with the whole commercial world. Increase its money and prices will rise: unless the amount or goods to bo bought and sold increases in an even greater ratio than the amount of money. And by money 1 moan gold, clitqu».-s, banknotes, and bills; in short, anything tlvat the seller is willing to take in exchange for his goods. ''But," some of your readers may object, "if all theso be money, what is there to prevent the amount of money being increased to any extent the world desires; and henco what is there to prevent an unlimited rise in prices?" Simply this:—You cannot increase the amount of gold as you like, and the amount- of banknotes, cheques, promissory notes, and bills which can be issued, depends almost entirely upon the amount of gold there is in tho vaults of tho banks. Whenever a panic arises the holders of the.<o instruments of credit demand gold for them, for gold is tho one thing which sellers in any part of the world will take in exchange for their goods. As a rule, the average person never thinks of demanding gold for* the banknotes or bills or cheques that ho holds; he prefers the infinitely simple method of paying thorn into his bank, and getting a few figures added to his account in the books of the bank. Careful calculations have revealed the astonishing fact, that for pvery two sovereigns in the vaults of the English banks, almost £100 worth of credit instruments pass with confidence between commercial men! And yet people accept these instruments because they believe that if they ever wanted the gold they could get it. And pvery great panic shows that they cannot get it; and beca nse they cannot, commercial and financial firms are brought to ruin. So gold we must have, and every ounce of the covetpd metal converted to the use of the

money market, must affect prices, by increasing the quantity of money winch may be exchanged for goods. . , Now, if we examine the statistics ot tho world's gold production, """ at . we find? That the gold production increased till 18GG (so did prices): that it fell during the early seventies, dragging prices down "with it: that from ]575 to IS7S it increased rapidly, and prices suddenly boomed: that from l&tii to ISS'i the production of gold declined, and this being an era of remarkable development of manufacturing processes, prices tumbled headlong downwards: and that from IScM- to ISjM there was a slight but continuously increasing output of gold, but sufficient only to steady and not to chock the decline in prices. But from 15*94 the production of gold increased with remarkable rapidity owing to the di.-covery of the precious metal in tho Transvaal and in Canada, and owing aN<» to tho discovery of the cyanide process of gold extraction. In liJ'.M the production was 100 per cent, greater than in ISS.U. Instead of declining further, prices jumped 2j per cent. The output of gold continues to increase and prices to rise. We nro as powerless to stop tho rise as we are to check the rise of tho tides. The stagnation and gloom of a quarter of a century ago have given plain to a fever of speculation, and a state of industrial unrest that demands the attention of the world's keenest intellects. J s there no remedy:-' (To be continued).