WE PRAY-AND PAY

Evening Post, Volume CXII, Issue 104, 29 October 1931, Page 11

WE PRAY-AND PAY

SWEET ADVERSITX

RAILWAYS SILVER LINING

Depression is a time whon surp] goods-are sold and debts are paid. ' say that debts are paid is" not to s that ail debtors pay. But what is n paid is, at least'struck, off the books assigned, written down, or written i as lost—and disappears from the ov< head of industry. Even the mere d appearance of a debt not represent by a convertible assot' helps to clc the sky. A lot of the mortgage dc incurred on farms in boom years : presented uo asset whatever, and reduce the absurd debt and the absu farm valuation is a step towards cli ity in Tural production. In like ma ncr the sale of surplus goods (even somebody's loss) stimulates consuir tion and gets rid of a lot of the ci , evidence on which is founded alle{ litms of over-production. And it is not to be assumed that, •' depression liquidation, goods are i Ways under-sold or debts are alwa ■nder-pald. A good deal of the liquic tion that takes place—though onforc by depression—is tolerably fair to sell and buyer, to creditor and debt Many years ago an American wri< Observed: '.'ln America in times prosperity we make our, debts; in tim df depression wo pay our debts, a then we start again." Taking up the same tale to-day, t Cleveland Trust Company's "Busin< Bulletin" remarks: "Wo in Ameri have gono through that process i poatedly. "When the end,, o.t" prosper! comes hundreds of thousands of peoj are heavily burdened with debts th h»ve been lightly assumed. During t hard times that follow, these debts a ■teadily paid off, and savings accun late. Eventually the savings predomi »te and seek active nse—find recove ■tarts."In short, in. boom time wo all gay. In depression we all pray—a: gome of us pay. Thus prayer jjmswered. To-day '■ individual debts are bei; Vapidly paid down in this country, adds tfce "Bulletin," and "this is o: of the more hopeful developments iCis depression period. . .Early in 19 the borrowings of brokers -who a members of the New York Stock X fhange amounted to about three billii dollars. During the long bull mark they mounted until in October of 19 |they were well over eight billions, jtbout 7p dollars for each person in t! population. They have now declin to. about one-and-a-third billion, or n much more than ten dollars per capi ©f our population." I But. while repayment -is going •< healthily, re-lending is not. AH t tain of bankers' {'safety first'? is beii ffelt, and the'joy is deferred.

"Banks here and abroad," states the •* Bulletin, '.'.' ' are still restricting credit rather than, expanding it. , Thoy are insuring their own- safety and security fey accumulating liquid resources on a scale seldom if ever.reafehed previously, •phis is good banking for the individual {nstitntion, and it safeguards the deposits, but it does not aid business r«< toyery. It does not accumulate new trasiness initiative, or encourage enterprise. Probably it is inevitable that Ihe policy of safety first should be followed while commodity price weakness jtontinues, but the condition constitutes ftne of the real difficulties in the general situation."

i In a country like New Zealand, whero 1)11.people (not. merely some persona) ijre shareholders in the (State) railways, and where there are no railway jSebentnres or railway stocks with Inountains of private- debt piled up ggainst them, it is mpst interesting to ioto that the "Bulletin" considers taat one of the principal causes of the Bafety first conduct of American bankers is the railway depression. "If the rail revenues could be increased, banking confidence in the future would be greatly restored." Why? Because "these railway securities .constitute the largest sin jle grouped aggregation fat American capital." < What an eloquent fact! Money has fceen lost on railways everywhere. Much tj£ it may never be recovered. The huge "aggregation of capital" in rail*!ways should be written down, perhaps jjermanently. That fact worries the New Zealand Government, and the New Zealand taxpayer, as owners of the Milways; they have interest to pay on lost construction Capital. 'But at least there is in New Zealand no super-added structure of capitalisation, consisting of Railway : securities and overdrafts against them. d.ver-priced railway securities and excessive liabilities connected with them: (relics of private profits that New Zealand railways never earned) do not beset the path of the New Zealand banker. The railway loss in this country, nine-tenths political, has at least the merit of'being Well-spread, and unconcealed. The revenue element in the capital account has already been written down, and the fact that the Stato is security leaves no ground for undue perturbation in financial circles—provided, of course, that the recent decision to abstaid f rom wastoful new construction holds good.