DECLINE IN PRICES

Evening Post, Volume CX, Issue 115, 12 November 1930, Page 14

DECLINE IN PRICES

QUICKER THIS YEAR

REDUCED' BUYING POWER

.' : "Evening Post," 12th November. No-general shortage of monetary supplies .will account for the drastic price falls of the past year is the opinion of the Department of Economics,- Canterbury College, in its report to the' Canterbury Chamber of Commerce. It notices that in some respects the present depression •which;', is world-wide in character, resembles that of 1907-0. Ultimate causes are obscure, but. present - conditions, as those/of 1.907-9, were precipitated by collapses/ of Stock Exchanges in New York and 'Europe. " These collapses shocked the ' confidence of-investors and business men md created a temporary scarcity of, and a.keen- demand for, money, occasioned a sharp fall in prices, together with contraction of' production and employment, and were followed' by a relative abundance of money -£or._whlch. .there was little demand; Low; interest rates ruled in 1907-9, and .at the 'present iime bank rates of discount in .New-York and Paris are 2% per'-Cent., anjl'the Bank .of .England rateis 3.per cenS; While,-Midori market rates for bankers' dl-iifts'Wnd- Treasury Bills are very ■slightly'over twijper cent:, and short loans .are available' at'. V/i: per cent. It is pointed^ out by the .Economic Department that such cyclical falls in prices are usually, of short duration and seldom coyer"-more .than \two' consecutive export seasons in New.: Zealand, ■■'■' ''' ' "More than a year has passed since the present adverse movement began, but there'is as yet little sign of improvement. . ... -At the present time there appears little-hope anywhere of any early or substantial rise in prices, though . some authorities are optimistic enough to anticipate no further falls." ..;■;'MIDLAND BANK VIEW. Bearing on this pofnt the Midland Bank,.' London, observes , that "on. all grounds the monetary outlook is decidedly brighter (September, 1930) than a quarter or hali a year ago. - In addition encouraging, 'encouraging,' that is, in .'different senses—have taken place in the /field of international finance." Reference is made in particular .to'the flotation of the reparation loan described as "one of the largestand most disturbing financial operations ever conceived or carried out." The, 'Midland Bank, ■in summarising the position, remarks that while few definite indications are visible of pronounced busi-ness-recovery in the near future, yet the surrounding conditions are favourable in a number of highly important respects. "That is to say, assuming no radical' change in these conditions in the meantime^ .(that when. business revival comes it is.'more likely to be given a ready and practical welcome, and- less likely to receive .. such a- rude rebuff as it has on previous occasions. Further than that, it is impossible to go at the moment, but even' this assertion, qualified as it is, marks a substantial advance on the position three months ago. ;We are by no means yet firmly established ,on the road to prosperity, but'-.at least the ground is more solid beneath our feet." " THE NEW ZEALAND FARMER. The Canterbury College Economics Department,, in .reviewing in particular the standing of :the New Zealand farmer, dwells on- the diminishing purchasing power of New Zealand exports since 1925. It is- stated that New Zealand farmers are now "netting proportionately less of the- rewards; of^their. own--enterprise,1 and, iiotw,i.th§ta;ndiiig.> r inc.reased production, they are ''using up their own capital and credit. "In some cases capital has been draining away since 1925. The capital stocks o£ farmers are not inexhaustible; in many cases they are already negative. When the capital and credit become exhausted a farmer must go out of business. , "A continuance of the present levels of costs and prices-, appears,, therefore... to mean fewer farmers; less demand ■ from farmers for goods.1' and services produced by industries selling in .the local market, and hence a. steady-: increase in- depression and unemployment,. :i. i ■'. ' :.'.-.'. . ■ ."This development may be avoided if prices and costs arc brought into reasonable equilibrium. New Zealand cannot control prices, received for its exports."