King Country Chronicle. Thursday, June 8, 1933. AN INTERNAL LOAN.

King Country Chronicle, Volume XXVII, Issue 4402, 8 June 1933, Page 4

King Country Chronicle. Thursday, June 8, 1933. AN INTERNAL LOAN.

The influential deputation that waited on the Acting Prime Minister at Auckland on Tuesday had a most interesting proposal when it was suggested to raise an internal loan of £10,000,000, compulsory if necessary, to put money into circulation in order to relieve the present economic position. The scheme has much to commend it in some ways, but under present economic conditions it can be asked if it is possible to raise this large sum within the Dominion. It is safe to state that at least 'one-third of the business concerns in the country are carrying on at a loss; that another third are just paying their way, and that the other third have had their profits reduced to a minimum. It was mentioned by the deputation that it may be necessary to make such a loan compulsory. There is not the slightest doubt about that, as the interest to be paid will be 3 per cent., while the minimum bank rate for borrowing is 5 per cent., and there are very few business concerns that do not require bank accommoda-

tion from time to time. When it is realised that three and a half million pounds are being- spent to provide relief for the unemployed, and that this amount is providing less than a bare existence, it seems scarcely possible that another £10,000,000 will provide permanent employment for the 70,000 men out of work. The commandeering of this sum, for it will amount to nothing less than that, will certainly have an effect on the industries now operating. While it is wise not to go abroad for further borrowing, it has to be realised that even an internal loan is adding to the public debt, and the burden in this way is already heavy enough, and most local bodies are also feeling the strain in this way. The plans of the deputation for the spending of the money give no guarantee that the works enumerated will be reproductive. While it is most desirable that the primary producers should be assisted in their present troubles, the granting of a bonus of a penny a pound on wool, meat and dairy produce is not going to give permanent relief. It would be more in the interests of the farmer to take steps to reduce his overhead costs by every means possible. The principle of paying a bonus has been tried out in this and other countries and proved economically unsound, though it has greater merits than raising the rate of exchange, which has not proved beneficial to the farming industry, and placed a heavy burden on other sections of the community. In replying to the deputation Mr. Coates said that if the suggestion were carried out there would be a burst of artificial prosperity and then a relapse. It is hard to understand that an expenditure 'of ten millions would result in a boom, large or small, but there would certainly be a relapse when the money was expended, and this would bring about a worse state of affairs than exist today. If this country had not such a heavy interest bill to meet, the scheme would be well worth consideration, but to add further burdens in this way can only bring additional troubles for the future. If we are to once more tread the path of prosperity the journey must be slow and steady. There are to-day some sound causes for a more optimistic spirit. Wool is showing signs of better prices for the future; the advance in butter of a few weeks ago is being maintained; and skins and hides are showing a better tone all round. Altogether the outlook generally for our exports is brighter than it has been for the last two years, and before adding to the burden of the country by increasing the State’s indebtedness, we should take the more difficult uphill path which will bring about a permanent and not an artificial and temporary prosperity with all the following troubles. The Keynes Plan of world reconstruction provides for a borrowing policy to ease the position, but Mr. Keynes acknowledges that Britain could not carry out the plan unless it was a world-wide movement. It is therefore obvious that if Britain could not adopt the plan with advantage to herself, the chances of blew Zealand are much more remote.