IMPORTERS AND THE EXCHANGE

Press, Volume LXXI, Issue 21449, 15 April 1935, Page 18

IMPORTERS AND THE EXCHANGE

to ms r.mrou o* lilt rp.ass Sir,— In "Th* Press" of Saturday "J.M.W." says that neither "Anti One -Eye" nor myself has refuted "Kaye Hoe's" statement that the high exchange did not lower the sterling price of New Zealand goods sold in London. I had dealt with the point last October so there was no need for me to repeat it. "J.M.W." says the banks have bought this surplus exchange with their own or their clients' money, but he had already admitted that the Reserve Bank acquired them by debiting itself with the required amount. The trading banks do the same. lie will find there is a great difference between buying with his own or anyone else's money and debiting himself.

I have been waiting for some time for some responsible authority to say there is nothing wrong with ths bank:; holding an accumulation of overseas funds as a result of the exchange ramp, I3ut, no! They have left it to "J.M.W." to rush in and say that we can have goods back for goods whenever we arrange to import them. It is quite true to say that the holders of £63,000,000 in New Zealand could buy the goods but, unfortunately for the argument, the bulk of the money is held by institutions which do not buy goods for use. The portion held by individuals is largely savings. They are trying to live in the income of it rather than sDcnd it and the income is spent first on necessaries, most of which arc produced here. It would be physically impossible for the comparatively few individuals, who hold the monev claims, to use the goods which the money represents. At present the importers are bringing in Iho utmost that thev dare to hope to be able to sell.

However, i tippu.'ini] that the owner.' of the money claims became nervous as to the safety of their money in the banks, and decided to turn it into goods to the limit of their means. They would have to reduce their deposits by £5"),000,000 to buy the £41,000.000 overseas, I doubt if the remaining £8.000.000 would be suflicient to pay freights and sales tax. let alone duty and landing charges. Thus the banks' liabilities for deposits in New Zealand and the overseas credits would cancel one another out, so that the only money left here would be the silver and notes in circulation. The borrowers of the £43,000.000 of bank advances would find it impossible to sell their goods for money wherewith to repay their loans. Thus the banks would virtually be able to take possession of the whole of the assets of the borrowers.

in spite of any plausible theories to the contrary, the practical result of the exchange manipulation is that the banks remain in possession of the overseas funds, or, as an alternative, they can get possession of a tremendous' quantity of wealth-producing assets in New Zealand. These are facts which cannot be disposed of so easily as "J.M.W." thinks. If he would make enquiries he would find that those who are competent to answer are unwilling to break their silence.—Yours, etc., W. B. BRAY. April 13, 1935.