£10,000,000 LOAN

Grey River Argus, 20 June 1933, Page 3

£10,000,000 LOAN

REPLY TO CRITICS Proposals Amplified AUCKLAND, .1 uue 17. Amplification of the proposals eon rained in (he financial plan for recon st ruction purposes submitted to the acting-Prime Minister by Ihe Auck land I ’nofticial citizens’ Committee i.‘ contained in a statement issued this niorniiig t he M :i voi . Alt I W, i I in L'hison. as head of the deputation, am: on behalf of the committee. I The Mayor said the sta.tement was necessary in view of (he wide public interest aroused by I he .£10,000,000 plan of reconstruction the deputation had put forward. It had been intended to defer a further statement until receipt of Mr Coates' written reply, but as over a week had now passed and tin 1 plan had been discussed from end to end of the Dominion, it was felt that further delay was undesirable. •‘The discussion evoked has revealed a strong desire throughout the community for a constructive policy,'' said the Mayor. “On the other hand, lit has been noticeable that almost without exception those who adversely Icrilicised tin l plan have no'alternate vo [remedy to advance. They have nothing tu offer, am] appa.rently regard any attempt at amelioration as futile. • ‘ Unvarnished Truth.' ’ “In some quarters the deputation has been accused of being unduly pessimistic in its statement of the position.’’ Mr Hutchison continued. “It did nothing but present the plain, mi- [ yarnished truth. We ;;.re entering on a winter with unemployment at an miI preemlented level, ami with trade and industry at a very low ebb. 'The \ctiiig- Prime Minister confirmed this when he said 'I should say it is im- ' possible for conditions to be worse than to-day. ’ “The committee considers that any impartial examination of the facts will show that the case for action is unanswerable, and that the belief that, onr difficulties will cure themselves is becoming a serious danger to the country. Among the arguments advanced in support of continued inaction is the fad that the World Conference is proceeding in London. It will be a lone time before the benefits of any policies there initiated are tell by the people of Xew Zealand. ()ur need is for immediate present relief. We have everything to gain by securing it in advance of whatever decisions may be reached by the International ConferIncreased Money Circulation. “A number of the press critics appear to have been by no means clear as to the true nature of the proposals advanced by the deputation. The fundamental principle underlying the plan is to bring about an increase in the quantity of money in active circulation This is onr greatest need. The next, points are (1) How to obtain the money, and (2) how to bring it into circulation and keep it there. The suggestions made by the committee for obtaining the money were ot a constructively suggestive nature. The point was that the additional money should be found, and quickly, ami the various ways of obtaining it were then examined. These were taxation, an interna) loan, an external loan, and currency expansion. “ ft was considered that to attempt to raise the money in whole or even part by additional taxation would be inadvisable; an external loan was not considered expedient or practicable; and there thus remained the alternatives of an internal loan or some form of currency expansion, as, for instance. by an emergency issue by the Treasurv of legal tender notes similar tn the emergency issue made by the British Treasury in 1914. Apart from suggesting that the lowest possible rale of interest be paid on an internal loan so as not to add unduly to an already crushing interest burden, the committee was little concerned as to which of the alternative methods the Government might adopt in providing the additional money for the scheme. A loan has the disadvantage of adding to interest charges; and the prevalent objection to currency expansion is based on a. fear that it tends to get out of hand, an event which did not occur in either Britain, France or Italy during or after the war. and against which it appears possible to provide adequate safeguards. Low Interest Rates. “Considering that the public debt I’icicased dining the period from 192 a t 1930 at an average rate of about uiilijmo pe r annum, the committee cannot regard its proposal for 2. >£10.000,000 expenditure as excessive, particularly in view of the low rate of interest proposed. It is unable to understand on what grounds the acting Primo Minister based his opinion that the effect of a compulsory loan at 3 per cent, would be to ‘ruin a great many deserving and struggling people.’ The public at present has nearly .£37.000.000 loaned to the banks on fixed deposit, ami the amount so loaned is steadily increasing, although the rates payable on it range from 24 to 3] per cent. If the banks can obtain £37.000.000 at these rates, what is to stop the State from obtaining £10.000,000 at 3 per cent..? •‘Furthermore, it has to be borne in mind that this money has been placed on fixed deposit because its owners fear to invest it elsewhere. Values | are falling and money is locked away for fear of loss on investments. At I the same time. the locking up of I money promotes a still further decline in values. The vicious circle is complete. On the other hand, if the State borrows the money and brings it into active circulation, the vicious circle is ‘broken. The increase of the money in

' irriil;i | ion (riol- 1,, reslore values, and the restoration of values promotes investment. The result of an expenditure of £1 O.OIin,OOH by the State should thus lead to a revival of private investment. Inaction by the State must Tend to the further deflation and further decline in investments. improving Buying Power. ,f The dist l ibuiion of expenditure pioposed by the committee was the result of careful thought. It considered this matter a> important as the provision of the money itself. It stressed ‘the fact that the object should be to I bring about an immediate improvement in the purchasing power of consumers. thus leading to a general revival of trade and industry benefiting Ihe whole community. The obvious method was to introduce the money at the points where purchasing power is most lacking. ‘•The committee i- unable to regard rhe rates proposed for relict' workers as excessive, either from a humanitarian or economic standpoint. The: bonuses proposed tor exported produce are not excessive in view of the crushing decline in produce prices, and the (ommittee. after inspection of the latest figures as to butterfat production and wool exports, finds its estimate of the cost of the proposed bonuses of a i peiinv per lb at £3,500,0(10 to be a fair figure. Air Coates was obviously in error in holding th; t £0,500,000 would be required for this purpose. I Tentative Estimate. •‘'l’he amount. of £2,500,00(1 pul. down as the estimated extra cost of tin.* proposed rates for relief workers I was purely tentative. It has to be remembered that the £7,500,000 of ex- ■ pemliture proposed under the other heads, including £3,500,000 for public works by the Government and local bodies, must in itself lead to a. conriderable reduction of relief expend'. . ture. Whatever the amount required , to pay the rates proposed, the com- • mittee believes it can be found, and i should be found. ‘‘The whole idea of the plan of expenditure is to bring about a general easing of conditions without undulv heavy outlay at any one point, and il Is for this reason that a wide range of channels for introducing the additional money is recommended. - * Language Misused. ’ ’ *'The proposals are not, a local ada.p- , tut ion of Mr J. Al. Kcvnes’ * Means to j Prosperity,’ as slated by some critics, lon were reached after a lengthy ; study of every aspect of our economic ■ position and the reaction th: I has 1 taken place to earlier attempts to stay ( tin l drift. There are. however, numer- i ous expert authorities that can be ' quoted to support the policy advanced by the deputation. To describe the relief to be obtained a.s ‘artificial prosperity’ is a misuse' of language. ‘‘The prosperity would be no more , artificial than the depression, for the policy of currency contraction ami deflation was deliberately initialed, and the distress which has ensued through the world in consequence is essentially artificial, in that it is distress in the midst id' a capacity to produce abundantly all the necessities ami luxuries of life. Plan Stands. ••Although Air Coates stated in his leply that ‘if costs can bo adjusted to prices our problems will be solved,’ it must be plainly apparent that the policy of reducing costs Io the level of export prices is not. practicable without wholesale ruin, and the only alternative is action on some such lines as advocated by the deputation. After going carefully over the criticisms passed on the proposals the committee has found nothing in them that vitiates the soundness of the plan put forward. The methods it advocates of bringing money into circulation are in line with what has been adopted in the United States and other countries, and the sooner such action is taken here the sooner will the value of property and securities be restored and the people reabsorbed in profitable employment. ‘‘it must not be thought,” the Mayor concluded, ‘‘that the response to the deputation’s proposals has been wholly critical. Many letters strongly supporting the steps taken have been received, some couched in terms of extreme thankfulness that an important step has been taken to promote action. The hope is expressed that as a result of the proposals submitted the actingPrime Minister will evolve a policy that will promise brighter prospects than opponents of the proposals have been able to discover in the present deflationary methods which they sponsor. ’ ’