CONTROL OF CREDIT

Evening Post, Volume CXXI, Issue 115, 16 May 1936, Page 10

CONTROL OF CREDIT

MR. COATES'S WARNING

ADDRESS AT CONFERENCE

LABOUR PLAN ANALYSED

Declaring that history had proved the unwisdom of politically controlling the issue of credit and currency, the Rt. Hon. J. G. Coates, in an address he delivered at the recent conference of the National Party in Wellington, uttered a warning against the danger of the "easy money" policy of the Government, to which the people had shown themselves susceptible. He charged the Labour Government with having played on the feelings and hardships of the people and with having sown doubt and uncertainty in the minds of otherwise sound and dependable citizens. He denied that the Government had the secret of giving something for nothing and everybody what they wanted, and emphasised the fact that there was a stern fight ahead if the Dominion were'to preserve its heritage of individual liberty and freedom. Dealing first with the question of credit control, Mr. Coates said that the powers taken by the Government to control credit and currency were such that no thinking person could view them with equanimity. The Reserve Bank, as it was originally established, embodied perhaps the most modern principles of central or reserve banking,- with a comprehensive strength arising from the association of State and private enterprise. Now it was' completely a State bank, and safeguards that had been carefully devised for the maintenance of financial equilibrium had been deliberately discarded. There was only one thin line of safety—the directorate appointed by the last Government —but even that directorate could be.removed from office without warning if it opposed the wishes of Labour.. . "Little or no new credit can be created by a man who merely sits in his office; pen in hand, and issues instructions for the provision of millions," Mr. •_ Coates said. "Credit increases only with increased production or the creation of new assets, and it takes a trained mind to see, that the cost of creating an asset does not exceed the final value of the asset created. Excess cost turns the asset into a liability. ■ ■ ■ "The effect of the Government's financial policy must be to leave doubt and uncertainty in the minds of those who previously have received ready accommodation for development. It has been stated by the Government that it does not intend to disturb existing financial institutions, but all the amendments passed by Parliament indicate, that the commercial banks must inevitably have their normal activities curtailed." GOVERNMENT'S DRAG-NET. Turning to ' the question' of the socialisation of production, Mr. Coates said though the Primary Products Marketing Bill was said to apply only to dairy produce, it was clearly designed so that wool,*mea.t, and all other products could be swept into the dragnet at the Government's command; To some extent the dairy farmers seemed to have adopted the Government's proposals, but disillusionment was bound to follow. "Under the Reserve Bank Act we can guarantee any price we like, but we cannot guarantee what-the product will be worth. If the guarantee is met by the creation of credit the guarantee will simply be cancelled out in higher costs." . The position, was already alarming, Mr. Coates continued. The amount of London credits at present was about £33,000,000. It had dropped by about £6,000,000 since the beginning of the year. Although exchange should have bs^n piling up in London, it had actually dropped at the very peak of the export season. Even with its commanding majority, the Government would be unable to check the stone which it had. set rolling. ' COMPULSORY UNIONISM., -"Through the .principle of compulsory unionism," said Mr. Coates, "the control of industry will be virtually handed over to the workers. This is an attack on the so-called capitalist which entirely ignores the fact that the direction of industry by the employer is largely responsible for the livelihood of his employees. There must be' co-operation between the two, but it sseems that the Government is blind to that. The basic wage and the 40-hour week must both increase costs. Already building quotations are 30 per cent, higher in anticipation, and some manufacturers are quoting from 12 to 15 per cent, higher in view of the prospective increase in costs. The people will find that the apparent benefit from increased remuneration will be quickly eaten up in increased costs. Manufacturing costs must rise, and by this means difficulties in the path of enterprise are being created deliberately." Mr. Coates emphasised the necessity for preparing for the future. "The great task that concerns- this, conference and subsequent organisation involves the interest of the young people of our country," he said. "It will be necessary to interest our young people in our national programme and in political history and economy. It is to the younger generation-that we must look to carry the ultimate responsibility of Government. The task is" onerous and far-reaching, and calls for much intelligent, preparation, hard work, and diligence," but let me assure you that it is worthwhile."