"BOGY OF INFLATION"

Evening Post, Volume CXIV, Issue 122, 19 November 1932, Page 12

"BOGY OF INFLATION"

(To the Editor.)

Sir, —Whilst the would-be golf champions are still regretting' the "bogeys" that defeated them so often last week, the business community of New Zealand is con-

fronted with a bogy, the defeat of which seems essential. The farmers' representatives, their organisations, and last but by no means the lease interested, their financiers, tell us that increasing the buying exchange rate on London to about 25 per cent, is the remedy—the only means of saving the farming 'community from utter disaster. , - ■• •

Now I propose to show- how difficult it is for business men to believe this statement. For my purpose it is perhaps not necessary to quote the exact price the farmers are receiving for-their produce, .but let us say that they have been receiving about sixpence a.pound for their wool; now, assuming that the farmer would receive the whole of, say, a 15 per cent, increase in exchange, his wool, instead of bringing sixpence would bring sixpence and nine-tenths of. a penny! Is this, going to save him from disaster? Obviously it is not, particularly when'one remembers that an extra 15 per cent, exchange put on to the cost of imported British goods would, by the time it is passed on from the merchant, through- the retailer (each necessarily adding his percentage on to cost) to the consumer, add about 29 per cent, to the present retail prices! And even leaving, for a moment, the'cost of importing out of the question, would it really and truly benefit the people on whose behalf all this agitation is being made? We are told that the position of the farmers is critical, and we know this is so; that of course means that their financial institutions will not continue to carry them on much longer. Very,well, let us take the case of a farmer whose gross revenue has dropped to £1000 a year, whilst his irreducible overhead expenses, including the bare cost of living, cannot to-day be brought below £1250—and the case is typical of many; if he secures the whole benefit of an increased exchange rate of 15 per cent, then his produce will bring (gross) £1150,' still £100 under his necessary outgoings. Obviously, then he gets not a penny more than before, but, ]ust as obviously, his financial agents or ms bankers, as the case may be, have to find- £150 less on his account than they did previously. And this, as I have said/takes no account of the increased prices which would have to be paid for all imported British poods which he buys. It might be said that there is little need for him to buy imported goods, but I think' the answer to this is that a one-way traffic iras never contemplated at Ottawa, that the farming community is not so unreasonable as to expect to be able to sell to Britain practically all their production but to buy nothing of hers in return. When it is remembered, too, that this Dominion's trade balance provides no justification for a higher, but rather for a lower, rate of exchange, it is extremely difficult for one who is neither a farmer nor a farmer's financier to believe . that the artificial remedy proposed-would result in any real gain to the community! ' _ Our. dependence upon the markets of Britain makes one firmly believe that prosperity will not return to this Dominion until Britain again enjoys a measure of prosperity, and that by putting an obstacle—in ai higher exchange rate—against the marketing of her goods here, we would be retarding in a measure her return to prosperity which is our only real hope for the future;—l am, etc;, . . . ■ > .. AUDITOR.