WEATHER TO COME

Evening Post, Volume CXXXIV, Issue 142, 12 December 1942, Page 6

WEATHER TO COME

READING THE GLASS

THE NEED TO PREPARE

(By X.) How many people glance at that barometer of prosperity (or otherwise), the weekly return of the Central Bank? Bankers watch it, of course, heads of insurance societies keep an eye on it; so do many business men. How many others? And yet its movements in so far as the Reserve Bank of New Zealand is concerned affect every man, woman, and child in the' Dominion. In the monetary world—which is the people's world—these - returns of central banks foretell periods of prosperity or give warnings (to those who'discern them) of possible poverty and distress. At the present time such barometers are all pointing to un-; settled or even stormy weather. Time cannot be retarded by putting back the hands of the clock nor "fine weather" secured by turning the needle to it. That evil thing, inflation, is already felt in little chilly breezes, portending coming trouble. The inevitable effect of war is to curtail goods and services for civilians and simultaneously to increase the incomes of many—temporarily—so as to catch up with rising prices of things. But alas! for many, and ultimately for all, there is no escape from the baneful effects of inflation. The process may be long or short, the effects painful, even agonising, but the bad ending is inescapable. Inflation is no new thing, but it has its dormant and active periods. Wars are the most favourable condition for its expansion and ferocity, as history shows. It was rampant following the Revolutionary War in the United States in 1776; in France, following the Revolution; in our own days in Russia, Austria, Poland, Hungary, Italy, France, and other countries as a sequel to the Great War of 1914-18. But because of the fiendish subtlety with which it was applied, nowhere was it worse than in Germany. Afterwards? Nazism in excelsis in Germany, and i the Great Depression everywhere— reaching even to remote New Zealand. The wise farmer and experienced mariner consult the barometer and act on their readings. They are not so silly as to adjust the needle to get the sort of weather they want. Bankers keep a close watch on central bank figures in the same way. These returns correspond to the barometer in the hall of the farmhouse or in the ship's charthouse. They forecast the industrial, commercial,' and financial weather. What do the returns of the central banks foretell today? Heavy weather. Leaving out reference to the central banks of the United States and Canada, the returns show persistent increases in their bank-note issues. Figures are tiresome things for most people, and are often accused of being used to prove anything, or nothing. But here are the note issues as they were before the war and as they are today:— , Note circulation. Sept., '39. Dec, 42. £ £ Bank of England ... 478,600,000 877,500,000 Oomm. Bank of Aust. 48,500,000 117,106,000 Res. Bank of N.Z. 15,802,000 28,460,000 Increases from early September, 1939, to December, 1942:—Bank of England notes up by £398,900,000 and provision made last week to increase them to £950,000,000 (as compared with the present circulation of £877,500,000); Commonwealth Bank of Australia, £68,606,000; Reserve Bank of New Zealand, £12,658,000. Bank-notes dp not buy so much in goods and services as they did before the war. A 4 rise in the cost of living by 3s or 4s in the £ can only be met by paying 3s to 4s over and above the £1 note than had to be paid before. This difference can be and has been made up by various devices, for instance, higher wages to correspond; Government subsidies, grants, controls, and other specifics; but these do not and cannot completely forestall inflation; they do not save the pensioner, superannuitant, salary-earner, and others of the great un-unionised army of have-been workers from the hard effects of inflation. These people have no increases in income to offset increased costs of living, goods, services, and so on.

If inflation cannot be evaded altogether, can its effects be softened, mitigated, counteracted? That is a question for experts to answer, and many of them with knowledge and experience commanding respect have answered it. Summing up their answers, they appear to agree in the application of (1) pluck in stabilising wages and prices of things; (2) absolutely fair and general taxation of all income, regardless of class; (3) increased savings; (4) cutting out all waste in materials, time, and effective energy; (5) strictest economy in public and personal spending. Already in New Zealand rationing of some things and, increased taxes have been applied; savings banks and national savings have been increased. But more yet must be done if New Zealand is to be spared the dir^-t effects of inflation. Legislators >- face up to facts, brushing aside counsel of quacks and cranks, fol, ing and applying practical and practicable methods, consulting, heeding, and following the counsel of specialists. So may the country ride out the rough weather that the bank returns predict.