“EASY MONEY LURE”

Dominion, Volume 29, Issue 196, 16 May 1936, Page 12

“EASY MONEY LURE”

Danger Confronting New Zealand WARNING TO PEOPLE Mr. Coates’s Address at National Conference The. danger facing the Dominion through the -‘lure of easy money’’ ottered by the Government formed the keynote of an address delivered at the conference of the National Party in Wellington this week by the Kt. Hon. J. G. Coates. The activities of the Government to date were reviewed bj Mr. Coates under three main headings credit control, the socialisation of production and the control of industry by the workers tluough compulsory unionism—ami he claimed that there was a stern light ahead if the Dominion was not to be robbed of its heritage of individual liberty and freedom.

“It seems to me that the people have shown themselves definitely susceptible to the cry of ’easy money’,” Mr. Coates said. "Lias the new Government the secret of giving something for nothing? I say it has not, and that if we embark on a prodigal programme of exceeding our incomes regardless of cost, we aie heading for inflation, financial chaos and national disaster.” The full extent of the Government’s legislative proposals was 1 not yet known, Mr. Coates continued, but under the three main headings of credit control, socialised production, and the domination of Industry by unionism, there was sufficient already to cause people to view the future with alarm. Control of Credit. The powers taken by the Government to control credit and currency were such that no thinking person could view them with equanimity. The Reserve Bank, as it was originally established, embodied perhaps the most modern principles of central or reserve banking, with a comprehensive strength arising from the association of State and private enterprise. Now it was completely a State bank, and safeguards that had been carefully devised for the maintenance of financial equilibrium had been deliberately discarded. There was only one thin line of safety—the directorate appointed by the last Government —but even that directorate could be removed from office without warning if it opposed the wishes of Labour. “Little or no new credit can be created by a man who merely sits in his office, pen in hand, and issues instructions for the provision of millions,” Mr. Coates said. “Credit increases only with increased production or the creation of new assets, and it takes a trained mind to see that -the cost of creating an asset does not exceed tlie final value of the asset created. Excess cost turns the asset into a liability.

“The position to-day is that all credits in the Dominion can be called up and used by the Government. This credit is composed mainly of the difference between advances and deposits, free deposits, short-dated money and overseas credits lying in the hands of qll financial institutions. They are al! at the disposal of the Reserve Bank if the Government so demands. 1 figure thSt approximately £136,060,000 could be available, but if those resources are rashly drawn on, the result will be the complete destruction and disorganisation of business and the smashing of confidence between borrower aud lender on which we depend for a sense of security. I do not say that the Government will go right to that extent, but the safeguards have been removed and the danger is there, if only people would realise it. “The effect of tlie Government's financial policy must be to leave doubt and uncertainty in the minds -of those who previously have received ready accommodation for development. It has been stated by the Government that it does not intend to disturb existing financial institutions, but all the amendments passed by Parliament indicate that the commercial banks must inevitably have their normal activities curtailed.” Guaranteed Prices. The socialisiation of production, Mr. Coates continued, could be attained under the Primal y Products Marketing Bill, which would enable tlie Government to acquire the ownership, of all primarj products, at a price which it would fix for itself. It had been stated that, the Bill applied only to dairy products, but it was clearly designed so that wool, meat and all other products could be swept into the drag-net at the Government’s command. To some extent the dairy-farmer seemed lo have adopted the Government's proposals, but disillusionment was bound to follow. “Primary production is tlie main industry of the Dominion,” Mr. Coates continued. “Indeed, it is the life-blood of tlie country. But under the Government’s proposals disaster lies ahead. A population of 1.500,000 cannot possibly afford guaranteed prices which may be considerably in excess of world prices. We depend on our exports, not on what we sell for domestic consumption. If prices are raised artificially to a point which encourages over-production, the greater will be the danger of an entire financial collapse. “Under the Reserve Bank Act we can guarantee any price we like, but we cannot guarantee what the product will be worth. If the guarantee is met by the creation of credit the guarantee will simply be cancelled out in higher costs.” The position was already alarming, Mr. Coates continued. The amount of London credits at present was about £33.000.000. It had dropped by about £6.000,000 since tlie beginning of the year. Although exchange should have been piling up in London, it had actually dropped at tlie very ]>eak of tlie export season. Even with its commanding majority, tlie Government would be unable to cheek the stone which it had set rolling. Compulsory Unionism. ‘Through the principle of compulsory unionism.” Mr. Coates continued, "the control of industry will be virtually handed over to the workers. This is an attack on the so-called capitalist which entirely ignores the fact that the direction of industry by tlie employer is largely responsible for the livelihood of his employees. There must be co-operation between the two. but it seems that tlie Government, is blind to that. The basic wage and the 40-liour week must both increase costs As tlie whole policy is developed the result must be that more and more control will be found necessary until all our activities will be at the direction

of th© Government and individual initiative, energy and liberty will become things of the past. “No thinking person can say that there is not a call for fiction liy those who wish to keep their Br.lis'i but”right of shinty imlependemi. VV e must look to the future and see to it that that birthright is restored amt guarded for the good of the countrj’ as a whole.”