TOPICAL SUBJECTS.

Horowhenua Chronicle, 27 February 1932, Page 6

TOPICAL SUBJECTS.

ASPECTS OF EXCHANGE AND INTEREST PROBLEMS.

PUT BEFORE CHAMBER OP COMMERCE.

There has been a revival of interest in the Levin Chamber of Commerce and meetings this year under Mr S. R. Stedman’s Presidency, have been well attended, with consequent discussion of subjects coming -within the Chamber’s purview. At the invitation of the President, some observations on current topics were put before this week’s meeting by Mf N. M. Thomson, who dealt chiefly with the vexed problems of exchange and interest remission.

“I have been asked,” said Mr Thomson, ”to inqke a few remarks to-night, and wish to make it clear at the outset that what I have to say is intended merely as a basis for a discussion. My remarks will consist purely arid simply of impressions, and inasmuch as an ‘ncident usually impresses several pie in several different Avays, it should be interesting to hear lioav the same subjects have impressed yon. I trust, hoAvever, that you are not liable to bo impressed, merely according to the degree Avith which the incident in question is likely to affect you for the moment, because the main point upon Avhich I Avant to touch to-night is the frequency with which wc see people advocating thisyind denouncing that, simply because it affects them one way or the other, and perhaps that for the moment only, without considering the effect of the subject in question on the world in general or their neighbours, or o\ T en on themselves subsequently —the parochial standard as opposed to the broad and national outlook. Let us take a broader view of all questions. Do not let us ask that a certain train bo stopped at Levin simply because it suits one or two of us that it should do so. Do not let us advocate free exchange just because for the moment* we think it might increase our prices. Do not let us demand more and more amendments to the Mortgagors’ Relief Act in favour of the farmer and against the mortgagee simply because avg happen to be for the moment in straitened circumstances. All these things may of course, be most desirable —the train stop at Levin, the free exchange, and the further derogation from the rights of mortgagees. I am not so much concerned tomight Avith • whether they are or not. What I want to say is this; are not the vast majority—l do not say all —of the advocates of a free exchange and of amendments to the Mortgagors’ Relief Act actuated by a very narrow and parochial outlook ? Swayed by self-interest and obvious of the common weal. If the immediate result of a free exchange was a drop in the rate -to 3 per cent., Avould those at present making a demand for free exchange continue their demand's Of course not. The demand for free exchange is made simply because the result Avould be expected to increase the rate to the benefit of a certain section of the community and the demand is made by that section. Has the effect of that benefit upon someone else been seriously considered? Has not the age worn maxim that you cannot get something for nothing been forgotten? If a free exchange to-day Avill increase the farmers’ income by £1,000,000, it ■will certainly cost someone else £1,000,000. Have the adAmcates of a higher exchange rate considered Avhether that someone else might not be themselves, cr at least other Now Zealanders? It is said that a free exchange is above ■criticism and must be right in principle and that it must be wrong to attempt to govern the rate. But exchange is a marketable commodity. It is •bought and sold like other commodities and its price is affected by demand or •the lack of demand? It is considered correct by many that the price of wheat should be deliberately regulated. If wheat Avere alloAved to find its own level the price Avould be much lower than it is now and the result Avould ruin the wheat farmer in New Zealand but would greatly benefit the poultry farmer and lower the cost if certain foods. For the sake of the whole, country it is therefore considered Avise that the price of wheat should be controlled. Many other commodities are similarly controlled inprice for the common good. Why should it therefore be wrong in principle to govern the price of the commodity known as exchange? Allow the rate of exchange to increase heavily and you many benefit the farmer in one respect, i.e., his apparent income may be greater, but you may ruin the importer, raise the cost of living, and enormously increase our overseas interest bill, resulting in an increase in taxation. Frequent variations in the cost of any necessary commodity are among the most undesirable of ills. Which is better, the oscillation of exchange rates between the margins of perhaps 3 per cent.; and 30 per cent., never knowing from one month to the next what it will be, or a wisely regulated exchange kept as near as possible constant and at a level neither so high that the importer and payer of funds overseas is ruined, nor so low that the New Zealand exporter does not receive some substantial premium to compensate him for the low prices. My own impression on the subject of exchange is that for the above reasons the present stabilisation of the exchange rate is desirable, so long as the matter is in the very capable hands of the Government, the Banks and a committee of economists. I have the further impression that few of the advocates of a free exchange have thought of more than the immediate expected benefit to themselves —an expectation, the realization of Avhich is to say the least of it, a very open question. ' SANCTITY OF CONTRACT.

“I wish to turn now to the question of so-called sanctity of contract undj its relation to the Mortgagors Belief' Act of 1931, under which with the per-, mission of the Court there is, pprnntr' led a. modification of some contracts without the consent of Loth partie|. As you are no doubt aware one of Ci'-y essentials of any contract is the assent, thereto of the parties, and any nipditi-. cation of an already existing contract is as a rule just a, s much subject'j:,p. the rules of contract as the, ■ original

contract itself. A contract cannot therefore m general be modified without the assent of both parties. That is the basis of the eo-called sanctity of contract and it is that sanctity that the Mortgagors’ Belief Act, 1921, so extensively abrogates. I have used the words “so called” when referring to this sanctity because a contract in English law is not unalterable like the laws of the Medes and the Persians. The alleviating provisions ot t l ie bankruptcy law give many an instance of permitted modifications and even repudiations of .contracts the assent of both parties. The v ' wages Extension Act, of 1919, and its amendments supplies a precedent 01 the Mortgagors’ Relief Act which accordingly, cannot be said, as sonic ha, r said. 1° 'undermine .tine sanctity o contract. That was undermined long The Mortgagors’ Relief Ac„ seems to be a. wise and .ameliorating measure, bound to do a tremendous amount of good for a com, para tiveely small amount of harm —a measure eminently suited to the times in which we i| ve and the administration of which hv the Courts has so far given apparent satisfaction. One however, cannot but fed apprehensive at the present movement by some bodies to add to the, " e of the Act. As originally passed nn the 17th April, 1931, during the pmergeiiey session of last year, the Act merely conferred upon the Court power • s+ a discretion to prevent the exer•q„ of the powers of sale, entering irto possession, and incidental powers under a mortgage. Less than seven months later, however (on the 11th November, 1931) the scope of tl e vastly extended, and under th amending Act the Court now has power / \ To extend the duo date for pay •11 cut of any interest; (lb) To retrace Se Uc of interest; (c) To remit the imle or any part of any aneais of interest These amendments, you will ie were a great advance on manciple of the original Act, and al Cuvb by most people they were no doubt received with pleasure, ney t er e the cause of much_ uneasiness amongst- many who were m the habit nf looking just a little further aheaa. At the same time, no great fault can p e found Avith the Act as iioav opera,i ll£r We can rely on the Courts to administer it with fairness, justice and enuitv. The investor of money should not be apprehensive of the present provisions of the Act. The circumstances qr e phenomenal. A certain measure of relief is essential, and without any Relief Act or compulsion the vast maiority of mortgagees have given- and would have given their mortgagors as much relief as can now be given by the Court. The Act is aimed omy at the few men who are not actuated bj.those desirable feelings of humanity and in favour of only those mortgagors who are really deserving of relief. But if the last amendment caused a little uneasiness, what would be the effect if some of the amendments recently advocated by responsible people became law? These people seriously contend that the Court should have power not only to reduce the rate and rqmit the ■arrears of interest, but also to reduce the capital. Tell a mortgagee that lie cannot compel payment of his capital for 12 months or so and that ho Avill probably get his interest in the meantime and he will not worry very much; even go so far as to deprive him of a little interest and you are probably in most cases not doing any great injustice or dnduily enlarging the excavation that has already been mads under the so'called sanctity of contract, but tell him that some of the actual cash that he has lent is to bo taken from him and that is a different matter. Losses he may certainly make by injudicious investments, but tell him that he can neither realize on his security nor have any right at all (even an unproductive right) to part of the cash lent, and you destroy the whole basis of credit. You Avill frighten the whole body of investors, thus perhaps crippling production and enterprise, reducing output and adding to the difficulties of an already difficult situation. To the extent to which it has at present gone the Mortgagors Relief Act is on the ivhole a blessing. To extend it along the lilies advocated might or might not be a calamity, but the present advocacy of such an extension seemis to me to be the result of a narrow and parochial outlook. Perhaps some of those advocating this sweeping amendment to the Act have not seriously considered its inevitable repercussions. I conclude these remarks with ,a plea for a broader outlook on all subjects—an outlook that will regard the interests of others as well as our own, and a field for the avoidance in the future of the present all too prevalent policy of studied self interest. ’ ’

Mr Thomson’s remarks opened up a discussion of the .subjects dealt with, in which views on both sides were expressed. He was accorded a hearty vote of thank® on the President’s motion.