Guaranteed Prices

Dominion, Volume 28, Issue 286, 30 August 1935, Page 9

Guaranteed Prices

Sir, —All political parties are out . to catch the farmer’s vote by guaranteeing him a price for his produce. _ But the farmer must know that, as 97 per cent, of his wool, 86 per cent, of his dairy produce, and 93 per cent, of his meat, is consumed in overseas markets, it is only to these consumers, and not to New Zealand politicians, that he must look for his price. The farmer was misled once over this matter of exchange when the Government took from him the only guarantee he had, by devaluing the New Zealand pound, paying him in 125 New Zealand pounds valued at 16/- each, instead of 100 sterling pounds, valued at 20/- each. I would warn the farmer not to be misled again. The only way to guarantee the farmer a price is to guarantee that the ton weight that measures the quantity, and the pound that measures the value of his product for export shall be maintained equal to the ton and pounds that measure the weight and value of imports. If a farmer requires a pair of boots valued at £l, he can only secure these by producing something that can also be valued i at £l, provided that the value of the pound ’that measures the value of his production is guaranteed to be of equal value to ihe pound that measures the .value of the product of the bootmaker. Sir Otto Neimeyer tried to teach us this when he urged that the. Government give statute authority to this guarantee, and that its maintenance be the major responsibility of the Reserve Bank, allowing only a fluctuation of 14 per cent, either way. His aim in doing this was to safeguard the New Zealand farmers against any attack from Australia. He foresaw the collapse of the Australian pound, due to the extravagance of the Australian Governments, and lie knew that if this happened. Australia must demand that the New Zealand pound be forced down to their level, 25 per cent, below sterling, to prevent the New Zealand farmer’s enjoying the benefit of a pound valued 25 per cent, higher than Ue Australian pound. We can now appreciate the value of this advice. The New Zealand farmer has been his own enemy! in assisting in this. Let the farmer demand, therefore, the guarantee of the value of the New Zealand pound to sterling, as this alone will give him a better exchange, increase his price, and, what is of great moment, assure him a continued free market in Great Britain —not for sentimental reasons too oft stressed by our politicians, but from a natural sequence of sound business principles: That every buyer must be a seller and every seller a buyer.—l am, etc., J. HISLOP. Auckland. August 28.

Sir.—The New Zealand Welfare League in its letter in Wednesday’s “Dominion’-’ says that “it may be so,” i.o„ there is little difference between guaranteed prices and exchange except in degree, “but on Mr. Langstone’s figures the difference in degree might be very great.” How can it be very great when, as I pointed out in Tuesday’s “Dominion.” that we are and have been for some time paying 1/2 a lb. for butter when the London parity was SO/- to 84/- per cwt., thus contributing sd. a lb. on exported butter. 25 per cent, on meat, wool, and cheese, which Mr. Ransom estimates at £14,000,000 a year, and when by all known rules of exchange it should be at par, if not in our favour? , I do not want io create the idea that I am against helping the farmers, where the help is needed, but as a taxpayer I do strenuously protest against paying forcibly collected taxes to wealthy wool and meat raisers who do not require assistance.

In referring to “manufactured money” I was using the term in the league’s letter. I first suggested that credit would do equally well. Let me ask the league did the Reserve Bank create any currency or manufacture any money? The fact is undeniable and yet the league definitely states that it was not inflation, notwithstanding the fact that all the leading newspapers have definitely called it inflation, so the Welfare-League has it on its own this time.

The league says: “The sterling balance in London belonged to the Government.” They did not go far enough back ami mention that it originally belonged to the trading banks and was taken over by the Government by Treasury bills, representing confidence and a promise to pay. If the Treasury bills had not been “manufactured” would the sterling have come over to the Government? Surely the league will not say “Yes." The league says the Government had no more money to spend in consequence of the transaction. How does it expect anyone to believe that? In my last letter I requested the league to prove the statement it made that “the Labour plan woiild to-day be equivalent to 125 per cent, exchange.” It has overlooked this proof, and I must again ask it to prove this assertion. Would the league, for the welfare of the consumers, also give us the amount which the 25 per cent, advance represents in selling price? If I say- 5/- in the £1 plus 20 per cent, for wholesale profit and plus say an_average of 50 per cent, for retail profit (5/1/- = 6/- 4- 3/- = 9/-). this means 9/- in the £l, or 45 per cent., which the consumer has to pay to uphold the high exchange, does the league agree to use this figure in its comparison?—l am, etc., EQUITY. Wellington, August 28.