"ARTIFICIAL PEGGING"

Evening Post, Volume CCX, Issue 145, 22 June 1933, Page 10

"ARTIFICIAL PEGGING"

When ;£he Expodt Credits Regulations ■were'in force, in 1932 exporters protested loudly sthat they wanted nothing but a free exchange. It •was given to them and they avere not satisfied. Thejy agitated for artificially high pegging and got it. To excuse this iiaght-about-face many curious argnmeiats are now advanced. The president Jof the Sheepowners' and Fanners' Federation yesterday thought of two new ones which would Ije tellfng if they agreed with the facts. Unfortunately for Mr. Acland they' do not. ' • I'm some years prior, to,this arrangement :[tho "high exchange], said Mr. Actond, cxdhange had been artificially pegged against the farmer exporter by Government borrowing in London, and foT the 1932 season, by an Order in Council, Tifliich legal opinion " adyiscd ■was invalid, forced upon the Goveminieirt at Ahe instigation of the banks. The statement concerning the 1932 Order does hot present the facts as they should be given. The Order was in operation only for half a season arad to say that it was "forced upon the Government at the instigation of the banks" is to make a grave misstatement.. The facts given by Mr. Downie Stewart, as Minister of Finance, were that a perfect panic had arisen in the London money market. The panic was so great that on the day of the General Election the New Zealand Government received a cable Saying that the position was so serious (that unless the New Zealand Government compelled—not asked—the banks to arrange to remit •to London & 1,000,000 a month for the next twelve months the position in London would be such that.it could not be coped with. What' Vas their duty under those circumstances! Surely, it was to see that New Zealand's good nanu was protected in, London at once. In order to meet the requirements it was necessary 'to constitute the exchange pool. The statement that exchange had been "artificially pegged against the farmer exporter l>y Government borrowing in London" will, not bear examination. It would be correct only if the Government raised its loans for the specific purpose of covering a trading debit. New Zealand did not do this. The Government borrowed'in London because it wanted the money for development. No small part of that London money was used to pay for British plant and material (for hydro-electric, railways, arid other public works) which would not have been purchased unless the loans had' been raised. Even the loan-money circulated in New Zealand for -wages and local materials helped to increase the demand for British goods, thus balancing the loan credits. Proof of these statements is to be found in the marked decline in imports when London borrowing was lessened. Mr. Acland's "artificial pegging" argument is no more sound than it would be to state that, the payment" of interest in London artificially pegs the exchange in favour of the farmer exporter. If New Zealand had not these 'interest commitments of approximately £10,000,000 (on Government and local body, debts) the balance would be much more favourable to the Dominion, and London credits would be at a great discount. But no one would argue that the Dominion pays interest so as to depreciate the value of the New Zealand pound, and it is equally ridiculous to state that the London borrowing was an ."artificial pegging"-operation.