WAY OUT OF DEPRESSION

Hawera Star, Volume LI, 20 June 1931, Page 6

WAY OUT OF DEPRESSION

REGULATION OF NOTE ISSUE

LABOUR MEMBER’S SUGGESTION SCHEME OF CONTROL OUTLINED Considering such a, move to, be the necessary first step oil the road out oi depression, Mr H. O R, Mason president of the New Zealand Labour Party, and Member of Parliament for Auckland Suburbs, advocated the re-o-ulation of the Dominion’s note issue by an independent commission in * place ef the commercial banks, when addressing an attendance of over 200 at the Foresters’ Hall, Hawera, last evening. Mr E. Morrissey, deputy* Mayor, presided. Mr Mason gave as his reason that the quantity of notes in circulation governed prices and business activity. The present regulation by private banks bad been a failure and had contributed to the collapse or prices. 4 “ agrees, - ’ he said, that the present depression in New Zealand comes from overseas and is caused bv the fall in the values of our produce in overseas markets. Further, all competent authorities recognise that this is caused by a general fall in world prices. It is not a case of a special condition affecting a particular commodity; it is a change in values generally. The same thing has happened in the "world before. There have been periods of rising prees and long perods of falling prices, and it has been observed 1 that these periods have been related to the amount of the world’s gold production. From 1809 to 1849 there was a fall in prices of 60 per

cent, because the enormous' increase m trade so greatly exceeded, the amount of gold produced. In 1849 gold was discovered in California,, and later in Australia. From a- production of £8,000,000 worth of gold per annum there was a rise to £41.000.000 worth in (1853. The increased money set prices rising, and they rose 50 per cent, until 1873, when they began to fall. Gold production had fallen and in 1886 it was only £19,600,000. There was a, long period of falling prices until 1896, causing disaster in many countries, particularly in New Zealand. The collapse of the Bank of New Zealand was the final atot in a long series of events which ruined, first the mortgagors, then left the mortgagees with unsaleable property, and finally the bank. The lesson to be learnt is that world prices had depended on gold production. Great gold discoveries in the Transvaal, Australia, and the Klondyke provided a remedy, but as geologists agree tbat new gold discoveries •on a large scale are unlikely, we are entering a depression from which we shall not, automatically emerge. We have to exert ourselves to find a way OF CURRENCY.

The scarcity of currency had clearly ■altered its purchasing power, added the speaker. The question arose, had one to submit to this alteration in the value of money which took place overseas? If we were to have prosperity we clearly had to keep our average export prices uniform, and we had to find a way of doing it. It was known that the currency of one country need not have the same value as that of another. At present, for example, New Zealand money was not worth as much as English money, but about 10 per, cent. less. This meant that our farmers, were paid) in New Zealand money about 10 per cent, more for their produce than the price of the same produced in English money. If an adjustment of 10 per cent, could be arranged there was no reason, why any other desirable adjustment should not l>e managed, that was to say, the adjustment could be made big enough to bring our prices, expressed in New Zealand money, to the same average figure as in days of prosperity This would solve most of our problems. “The question that arises,” proceeded Mr Mason, “is how this is to be done. The first thing to notice is that it is useless pretending that it can ho done with a gold standard. It would be silly to say that no more milk .should be produced than could be accommodated in gold cans. It would not be much wiser to say that the gold cans might be put out of sight and three compressed paper vessels used for each gold can. Yet that is the sort of thing our currency system does. It is obvious futility to talk of increased production under such circumstances. We want enough currency to do, business with ; if there is not enough prices fall, as at present. If there is too much, prices .rise; that gives the test. The right amount ‘is that amount of money Ju circulation which will keep prices at a constant level. Notes could be issued or withdrawn from time to time to secure this result. It would be expedient to bring prices to the level existing in recent periods of prosperity, because most of our contracts were based on that price level. Then, by regulating the note issue they would be kept at that level. It is true that the consequent change in exchange! rates would prevent these notes being equivalent to English notes in Engl land, and this would be felt in buying imports. The price of imports would rise, but the notes would! be perfectly good in -paring debts in New Zealand, including interest. The result would be prosperity to the farmer, which would mean prosperity to everyone.

MEANS OF REGULATION “To achieve such, a regulation of note issue there would require to be an liidependent authority, having a similar status to the Auditor General, who cannot be removed by any Government, but only by a vote of both Houses of Parliament, on account of misconduct. It is necessary for our general price level to be as free from the influence of Government budgets ns of commercial banks. Changes in prices are always unfair to one' class or another, and an independent auth-o-r----lt.y to regulate the am out o,f money m. circulation is the -only safe remedy. The resulting certainty as to prices would abolish, the present depression, and with it the- unemployment problem.”

Many people in many countries were thinking of these problems, continued the sneaker. He considered, however, tn'&t Xew Zealand! was the first country to lead the way, partly because our banking system was isimipder than that of.most countries, but chiefly because this was a country whose people had shown a capacity for going in advance •of the rest of the world in the solution of -problems’, as had been shown in, the fact that the world owed to New Zealand such things as the Public Trust Office, old age pensions, State advances to settlers .industrial conciliation and) arbitration and universal penny postage. He appealed to his hearers to show that Near Zealand had not lost that spirit of initiative, and trusted that, whether or not his theory was accepted, considerable thought Would be given to the question.

REPLIES TO QUESTIONS. Questioned, Air. Mason, said it would be very unsatisfactory to attempt to stabilise prices at the present level. Ir the present prices were to be made average, what chances were there, l'oi the farmer? It was necessary to lift the prices to ail average of values on which existing con tracts were made, otherwise present difficulties would lx confirmed. The public debt could be divided into two 'parts, that owed to people in New Zealand anj that owed to people outside the Dominion. Really, the debt doubled itself as produce prices halved themselves. That owed outside of New Zealand, ii-ow-evea*, could be influenced only when the British decided to stabilise its currency. if something in that direction was not done at Home there would be many countries unable to pay, Replying to Air. AY. G. Simpson, Mr. Alason said he believed that the sag of prices in one country tended to sag the prices in another. If the price level was maintained in New Zealand it would help materiaily to keep up prices at Home. Air. A. H. Larkman asked the speaker if the proposed note issue was not a compulsory means to reduce interest.

“Interest rates are remarkably high in New Zealand and should he lower,” replied Air. Alason. “The scheme would force the fixed deposits from the banks and naturally would tend to reduce the rate of interest. Hie actual money in circulation, from the banks at the present time is only five-seventh® of the amount in circulation when times were prosperous,” he added'. A hearty vote of thanks was accorded the speaker.

DUTY O'N WHEAT. MEMBERS FAVOUR RETENTION. (By Telegraph—Press Association.) TIMARU. June 10. A meeting convened to-day by the I/ahour Party to discuss the- slidingscale wheat duties was largely attended by farmers and others interested in wheat production. Addresses were delivered by Messrs. J. McCombs, UCarr and T. D. Burnett, M.’sP. The T/abour members emphatically favoured the retention of the present duties and a 'price for wheat to farmers of 4s 9d a bushel on trucks.