Debits and Credits

Dominion, Volume 24, Issue 240, 7 July 1931, Page 11

Debits and Credits

Sir, —If your correspondent, “Malvern* ian,” in your issue of 2nd inst.,_ could sense my “so superior and dogmatic tone in correcting Mr. Treadwell,” perhaps he may sense the same tone while I am correcting him. In suggesting that 1 “have overlooked the fact that a substantial part of the year’s imports is accounted for by the year’s overseas borrowing,” he says, “in effect we borrow goods—imports.” No, we do not. We buy goods (imports), and we sometimes borrow to pay for those goods. Though it has not the least bearing upon my contention in my earlier letter, apparently the point which “Malvernian” wishes to make is that, “If our borrowing were reduced this would ca. ie a corresponding reduction of State imports.” Quite so, but this point affects only the totals of debits and credits, while it leaves unaltered the final balance between the debits and credits.

It is a pity “Malvernian” did not illustrate this point himself, for by doing so he should have saved himself a deal of ridicule from his futile entry into public print. \ To illustrate the point let us take the financial year 1026-27, when we borrowed. £7,000,000, and let us assume that for this year the value of imports by the Government for public works was £3,000,000. According to “Malvernian," if these goods for public works, costing £3,000,000, had not been imported, the Government need have borrowed only £4,000,600 instead of the £7,000,000.

To complete the illustration, if we deduct this assumed £3,090,000 of public works imports from the actual value of imports for the year—£48,192,670—wo have “adjusted” imports of £45,102,670 plus interest on overseas debts of £8,000,OOO—total £53.192,670-r-balanced against our credits of actual value of exports, £45,682.338, plus “adjusted” loan of £4,000,000 —total credit of £49.682,338 — leaving us with the same debit balance of £3,510.332, which I used in my earlier letter. It is futile to suggest that the Government can abstain from importing goods for public works each year, and it is equally as futile to suggest that any fluctuations in the size of the loans resulting from excessive or restricted imports for public works can materially affect my earlier contentions. Thanking you. Sir, —I am, etc., 11. S. MONTGOMERIE. Wanganui, July 2.