CAUSES OF WORLD DEPRESSION

Hokitika Guardian, 24 March 1931, Page 2

CAUSES OF WORLD DEPRESSION

FINANCE AND POLITICS. RETURN TO OLD EXCHANGE PARITY. AUCKLAND, March 20. “I would like to strike a note of optimism: Although there ure no very clear sighs Of a 1-Otiirh to prosperity, recent reports from the Uhlted Kingdom and the United States of America are optimistic, The fall hi prices hn« been chocked, tliK'ir fi now? ini position is better and an improvement should take place,” said Dr H. Bclshaw, professor of economice at the Auckland University College, in an address before the Auckland Creditmen’s Club. Professor Belshaw confined his remarks to the present world depression and its causes. At the next meeting of the club he will speak on the manner in which the position might bo righted Although things had been bad in England since 1920, said Professor Belshaw, it was not until recently that the crisis had affected the whole world. At the present itime, there were 10,000,000 unemployed in the United States, the United Kingdom and Germany alone. THE REAL TROUBLE. The real trouble arose out of financial and political considerations. Since 1920 the tendency had been for the production of goods to increase more rapidly than the value of money or credit, and the level of prices had fallen. That factor had been intensified by the maldistribution of gold. France and the United States hod more gold than was necessary to maintain •their level of prices.

He considered that the most serious mistake made in Britain after the war was the cEort to establish the pre-war parity between the £1 and the dollar. That was, in his opinion, on e of the main factors in the depression. France stabilised her franc at one quarter its pre-war value and escaped depression. INTEREST TOO HIGH. Another factor was the high rate of interest. The rate of interest had a customary element in it, and he was sure that the rate was too high. The amount people saved, and which was thus available capital, was determined by the surplus over ordinary expenditure, and if the surplus rose the amount saved was also greater. A reduction in ti'i e rate of interest would rcsidt in the surplus over ordinary expenditure being greater. As regards the political side Professor Behsliaw said that increased tariff harriers, which made it difficult to place additional outputs of goods on external markets, and international indebtness consequent on the wa r and resulting in increased taxation, were the two main factors. They formed the economic and psychological condition for the present slump. He considered that the present slumo arose in the United States where the business position was marked by over-confidence and the expectation of higher profits. A boom of speculative activity bad arisen on the Stock Exchange, and the discount rate was

raised to check this tendency. It also damped industry, and the boom collapsed. Professor Bel/shaw made short reference to New Zealand, and suggested three theoretical cures for the situation. The first was an improvement in the export prices, the second increased production, and finally and most important, a reduction in other prices. By “prices” he meant wages, interest rates and all costs.