WELLINGTON NEWS

Hokitika Guardian, 19 January 1932, Page 6

WELLINGTON NEWS

exchange embargo

(Special Correspondent)

WELLINGTON, January 18

The problem of the exchange on Loudon has become an apparently important one to the producers, but it is an open question whether they are on sound ground in their contentions. It is necessary to understand the present position. The Government has been told pretty plainly that London is not prepared to grant a loan except for conversion purposes, that is to say a loan involving fresh capital ,L unobtainable. In the past, last 4Srl§X 01 ' eai '7 in May, the a loan in London. The proceeds of the loan were held in the Blank of England, and out of the interest and other outgoings of tlie Government were paid. This saved the Government exchange. Now that the Government cannot raise a loan in London it must arrange for exchange, that is it must pay to the banks the amount due, the banks undertaking to pay in London. 'lhe banks obtain credit in London through the sale of the produce of the Dominion by bank clients. The Government to meet its obligations requires on an average a million pounds per month. It- must be obvious that unless we had control of the entire proceeds of the sale of exports, they would be unable to meet ithe Government demands in full. It i s to ensure that the banks shall have full control of the London funds derived from exports, that export licenses are issued. The contention ol the primary producers is that tins embargo on the exporter prevents the exchange rate Loin rising, and it was stated bv the deputation that waited on the Government the other day that in open coinpetition 'the exchange would rise to 30 per cent., that is sterling would be equal to £l3O New Zealand pounds. It is a question whether thi s would happen under free competition. The greater part of the exchange business is done by the banks, and in the past they have handled the exchange problem with skill and fairness. Suppose that R did rise to £l5O the Government would have to pay 30 per cent, more for London funds. It is now under arrangement with the banks to pay an average of £IOO,OOO per month on the £1,000,000, »uul if the farmers had their wav the Government would have to pay £500,000 per month in exchange. Who finds the money? Surely it is the people a,s a whole.

Another view is that importers would be obliged to add 20 per cent, more to their imports, which means increasing the cost to the consumer, or they must import inferior quality goods at lower prices, in any event this seems inevitable. If the cost of goods is increased the cost of living i s increased, and the workers would have good grounds f«i demanding an increase in wages.. We will be working in a vicious circle. The rate of exchange is fixed by the banks, and bankers who are in daily contact with the exchange problem are the most competent to fix the rate. Bankers do not deal exclusively with primary pro-duce,-s—they have .among thGr valued clients many importers whose business would suffer very seriously. If the embargo is detrimental to the farmers it is not detrimental to the community as a whole, and let it not be forgotten that the community has subscribed to the policy of special and generous treatment of 'the farming community. It will be freely .admitted by all classes that I'arnnrs are sufferers through the slump, but their future does not depend upon the rate of exchange London on New Zealand or New Zealand ,n London. The high prices paid for broad acres, the cheerful manner in ,vhich mortgages were made and stock ml farm implements pledged tor advances have played no small part m •rushing the primary producers. It is t„ be hoped that the Government will not interfere with the exchange rate fixed bv the banks, at all events it must raise the rate against itself ami P'. nnlise the peop.e in consequence.