A “MONETARY PUZZLE”

Dominion, Volume 29, Issue 93, 14 January 1936, Page 12

A “MONETARY PUZZLE”

New Government’s Policy

The evolution of the New Zealand Labour Government's economic policy will be watched with great interest, <say« the ‘‘Economist” of December 7. For the declaration made by tlie Prime Minister, Jlr. Savage, on (he morrow of hits victory can only be described as perplexing. Wage cuts are Io be restored, social expenditure expanded, and farmers’ prices guaranteed. So far so good. But at the same time tlie exchange rate In to be "reduced.” ‘’Reducing’’ the exchange rate means, of course, raising the value of the currency—i.e., diminishing the number of New Zealand pounds that can be bought for a pound sterling. This, in turn, means deflation, which will doubtless benefit the purchasers of imports, but will at the same time be directly contradictory to the rest of Mr. Savage’s policy. There is one. form of combined inflation and deflation which is practicable ami may be desirable; that is the policy adopted by Australia of simultaneously deflating costs and inflating prices. This naturally promotes profits ami so general recovery. But Jlr. Savage’s idea is’ simultaneously to deflate prices and inflate costs. The effect of such a policy is not difficult to foresee. We strongly suspect, however, that the deflationary part of Mr. Savage’s programme—the “reduction” of the exchange rate —will fade decorously into the background.

Customs Exchange Rates

Rates of exchange ruling at the announced dates of departure of vessels named are shown in the following table:— Cornwallis, Canada, dollars 4.98 Cornwallis, America, dollars .... 4.92 Canadian Britisher, Canada, dollars 4.99 Canadian Britisher, America, dollars 4.92 Sydney Marti, Hong-Kong, dollars IGId. Sydney Maru, Japan, yen 14d. Northumberland, America, dollars . 4.94 Northumberland. Canada, dollars . 4.98 Nardana, America, dollars 4.93 Nardana. Canada, dollars 4.99 Golden Cloud. America, dollars ... 4.93 Exchange rates for Continental goods, ex the lonic, have been fixed as at November IS.

Tinned Beer

A cablegram from London published recently stated that tinned beer made in England is to be exported at' an early date. Experiments have been proceeding in West Wales in canning beer, on the lines adopted in America (says a London trade report). Recently a special consignment of 10.000 boxes of tin-plates for tlie specific purpose of making beer cans, was shipped to an American can manufacturing firm. This was a trial order, but it is anticipated that Hie experiment will be extended to tlie advantage of the Welsh tinplate industry. Referring to this development, “Aiming and Metallurgy,” a New York publication, stated : —“According to estimates vouched for by the American Iron and Steel Institute, 11,500,000 man-hours of labour, equivalent to one year’s employment for nearly 6000 workers at iron ore mines, furnaces, aud steel mills, with wages of nearly 5,000,000 dollars, will be required to produce the 1,500,000,000 ‘tin’ cans that will be used in 1936 for the retail distribution of the brewed beverage called beer. In addition, it is pointed out. other millions will be spent for wages and materials used in making machinery and equipment to produce the containers.”