CORRESPONDENCE

Evening Post, Volume CXX, Issue 116, 12 November 1935, Page 10

CORRESPONDENCE

CONTROL OP CREDIT

WHAT DOES IT MEAN ?

(To the Editor.) Sir, —I appreciate your criticism of Mr. Savage's explanation (or, rather, lack of explanation) on Tuesday evening of Labour's method of dealing with the money problem if returned to power, but would like to raise one or two further points in the same connection. Firstly, the State already has control of currency and credit as far as is possible, through the Reserve Bank with its preponderance of Government nominees on the board. Once again this overworked and much-abused word "credit" was brought into prominence, and once again, in spite of Mr. Savage's statement—"l think Ido understand something about that (the economics of banking)," lack of appreciation of the fundamental meaning of the word was displayed. Derived from the Latin "credo," I trust, believe in, or have confidence in, confidence is still the foundation of financial credit. Credit is not just a mysterious panacea "issued" by some monetary authority in much the same way that a machine produces, say, sausages, and as many appear fondly to imagine at far less cost than the latter. It is the intangible confidence and belief of the lending public as a whole that their loans will be repaid on due date. Trading and savings banks; stock and station agents, mortgage companies, insurance companies, merchants, retail traders, and last but by no means least, all those who have saved any money which is not kept in a stocking, are all lenders; i.e., issuers of credit, and it is when these people for any reason at all become afraid that they may not obtain repayment for their loans or services, that a period of restricted credit or depression results. It is a fallacy to suggest that trading banks are the arbiters of "credit," and can contract or expand it at will. It is their job to deal in credit, but they are definitely limited in its issue by:1. The volume of their cash reserves (which in turn depend cm the volume of their deposits, i.e., their depositors' faith in them). 2. The demand for credit (governed by the possibility of the borrowers employing loans at a profit). 3. The ability of prospective borrowers to repay (the very last thing, a bank wants to do is realise on collateral security). By following out these cardinal principles of lending, universally known to banking students, the New Zealand banks came through the depression without giving rise to even a suspicion of their instability. If anybody is inclined to doubt the value of this they should inquire what happened to depositors in the case of a well-known Government savings institution which suffered lack of confidence in- Australia, and to innumerable American banks which did not carry out these principles. Does Mr. Savage intend to throw these principles overboard either through a State Bank' or by further "control" or "taking over" the trading banks? In this connection, the statement of "Viscount Snowden, ex-Chan-cellor of the Exchequer in England, springs to mind: "If the banks were nationalised they would have to be managed as they are now if their solvency was to be maintained?" Of the three ways of raising money for capital works, Mr. Savage discounts (a) taxation and (b) borrowing, and plumps for (c) "intelligent use of the public credit." What does this mean? I take-it that it does not mean contraction of the note issue, or leaving it at its present level. I appears to me that the only alternative is inflation if (c) is to mean anything at all. One of the most potent reasons for fear on the part of lenders is the hint of inflation, since such a policy inevitably brings loss to the lender and to all people operating on fixed or nearly fixed incomes, e.g., the mass of the people. Those with something to sell escape this loss through increased prices. If the answer to this is price control, then the result of that would be failure to produce the requisite quantity or quality of goods, viz., shortage of supplies in Russia and subsequent reversion to modified capitalism). I must most strongly endorse your demand for greater clarity in any monetary proposals made to the electors. The blank cheque to the Coalition Government was misused, and the nebulous statements of responsible Labour in this connection give every indication that it would be misused again, and the public would be the subject of monetary experiments, with lack of confidence, loss of savings, and general chaos in their train. The main trouble today is not shortage of purchasing power, but maldistribution of purchasing power. Some have too little and others too much. Let Mr. Savage attack this problem openly and without resort to monetary manipulation, which is invariably disguised inflation, ultimately reacting unfavourably on the masses.—l am, etc., STUDENT. MATRICULATION PAPERS (To the Editor.) Sir, —Is it too late to make the muchneeded alteration in the length of time allowed for the mathematics paper in the matriculation examination? Two hours is much too short, especially as ten minutes of valuable time may be taken up by statements by the supervisor. If this preamble must be indulged in, why not arrange that the assembly be ten minutes earlier, so that the students could have at least the full two hours? London has three chances for matriculation during each year, and has, I believe, three hours for the mathematics paper. The Australian universities also have two and a half to three hours for this paper, and failures at the end of the year can sit for a post examination before the university course begins early in the year, thus in many cases obviating the loss of a whole year. All the great American universities and five of the English universities have done, or are doing away with matriculation. Why should New Zealand lag behind and make conditions so much harder than in any other part of the English-speaking world? —I am, etc., SYDNEY GRADUATE. ADDING FARM TO FARM (To tho Editor.) J Sir,—The report in the "Evening Post" of "the biggest land deal in recent history in Poverty Bay," by which Mr. Humphrey Bayly added at a cost, "reported to be in excess of £100,000," some 15,157 acres "to his already substantial holdings," gives no little food for thought. It would be interesting to know: (1) Whether this 15,157 acres is suitable for sub-division; (2) if so, how many small holdings or small farms it could be subdivided into; and (3) if so subdivided, how many unemployed men and their families this 15.000 acres would give a chance in life to? It would also be interesting to know (1) the unimproved value—the com-munity-created value —of this additional 15,000 acres and of the purchaser's "already substantial holdings"; (2) to what extent the purchaser bene-

fited by the repeal of the graduated land tax; (3) how much more graduated land tax he would have had to pay, but for that repeal, on adding this 15,000 acres to his holdings; and (4) how much per year he has benefited already and how much more per! year he is now likely to benefit by the high rate of exchange, reduced": railway freights, derating of rural lands, and all the other forms of State-relief given by the present Government to landowners. , > The1 Minister., of Finance states that the relief to farmers amounts to some £14,000,000 in all, and we know that there is no "means test" in regard to it. On the contrary, the bigger the I landowner and the better off he is, the \ more he gets in high exchange benefit and every other form of State relief. —I am, etc., ■ i , ECONOMIST. CURRENCY VALUES (To the Editor.! Sir,—ln a Press Association telegram from Christchurch, Mr. M. J. Savage, Leader of the Labour Party, is reported as saying: "Every person who deposited in any bank a pound worth 20s before the raising of the rate of exchange could at present draw from that bank a pound worth only 16s Id," and again: "The raising of the rate of exchange had, without any run on the banks, destroyed 3s lid out of every pound of the people's savings." What Mr. Savage did not say is that a New Zealand, pound is worth a pound in New Zealand today, in terms of our own currency. If he doesn't think so, I am prepared to buy from him and every other Labour candidate at 16s Id every New Zealand pound that they have got.—l am. etc.. VOTE-SPLITTING (To the Editor.) Sir, —Is not the Independent candidate for Wellington North taking herself too seriously when she says, "that the Prime Minister is aiming solely at her in his reference to the Independents, and that she knows" the past history of the Prime Minister in politics and the less he says about the Independents the better?" The Prime Minister was, of course, referring to such stalwart ex-Liberals as Messrs. Veitch, Atmore, and Stallworthy, to say nothing of the other well-known Independents who are contesting seats. As a follower and supporter of the Liberal Party for many years, I protest against the attempted slur on Mr. Forbes, and say the Liberal Party has never been led by a cleaner, more honest, or more respected head than him. He is a man who, fearless of consequences, has, throughout his whole political career devoted his talents almost exclusively to the service of his country. It is obvious that Mrs, Gilmer cannot be selected as a National candidate when she declines to support the Government.—l am, etc., AN OLD LIBERAL. (To the Editor.) Sir,—"Observer" in Saturday's correspondence' column is evidently a resident of Wellington North. One is surprised at his letter, for he seems very worried about a Labour win. Why worry, when the Leader of the National Government does not seem to be worrying, and the Minister of Finance is more worried about the Democrats, for he is spending his time chasing their leader. It would appear that "Observer" wishes the Independ-j ent candidate to withdraw. Does "Observer" realise that there are voters who are non-party in their political views and choose what they consider the best candidate in the field? I agree with "Observer" that there should be a withdrawal in Wellington North electorate, and in my opinion the withdrawal should be in the interests of the. citizens of Wellington and New Zealand as a whole, resulting in a sure win for the Independent candidate who has done so much in the past for the Wellington community, irrespective of class.—l am, etc., INTERESTED POLITICIAN. GARDEN THIEF PESTS (To the Editor.) Sir,—Permit me to encroach upon your space in an endeavour to find some practical solution to the problem which seems to always confront those residents of Kelburn who dare to attempt to beautify any portion of their property by growing a few flowers thereon, choice or otherwise, which may catch the eagle eye of the garden thief. This class of pest seems to 4hrive exceedingly well in this district; it takes a great toll of flowers and plants, more so than all the slugs, bugs, grubs, and wind put together, and goodness knows these are not idle. I have lived in Wellington a good many years, and in several localities, but have never experienced the losses at the hands of the despicable garden thief as I have experienced during my few years' residence in fair Kelburn, they seem to infest the district; white butterflies—well, they at least make their attacks in broad daylight and open-handed. I rather enjoy members of the public helping themselves to any of my blooms which have the audacity to dare show themselves through or over the fence, or in fact anywhere within reasonable access from a public highway, but I do become quite annoyed when the "thief" enters a gate, or climbs a five to eight-foot wall and traverses 30 to 40 feet of pathway in order to secure some choice specimens of plants, even though they may be securely staked. Alas! Stakes and all disappear. I have seen many beautiful gardens private ones, in America, with noi even a fence to protect them, anc they are not molested. Even though human lives may be cheap at times ir that country, there seems to be some queer sort of respect for a garden which certain very doubtful citizens of Wellington might well develop with advantage.—l am, etc., DISGUSTED. A PLUCKY ACTION (To the Editor.) Sir, —Having witnessed fn the city this afternoon an act of great courage, and lest it should pass unnoticed I would be grateful if you would publish this brief account. Proceeding in my car up Panama Street from the lower side I was suddenly horror-stricken to observe a driverless lorry drawn by two draughi horses in full gallop. As it swung oul of Featherston Street into Panama Street, suddenly in a flash a young man sprinted from the kerb and flung himself at the head of the left-hand horse. With commendable courage he hung grimly on for forty yards bringing the horses to a fullstop at the side entrance of the D.I.C. He was assisted by a man who sprang from the other side engaging the other horse as the pair were slowing down, thus materially helping to avert a serious accident. On the arrival of the driver the young man who was first to the rescue and who had shown such courage and quickness stepped briskly ofT as if nothing untoward had happened, He had most certainly risked his life, for had he slipped he would almost certainly have been trampled or crushed.—l am, etc., V. McDOUGALL. November 11,

HONESTY.