Prices Suffer Landslide

Manawatu Times, Volume 60, Issue 133, 8 June 1935, Page 2

Prices Suffer Landslide

COSTS CLIMB DOWN SLOWLY REAL CAUSE OF ECONOAHC WOES A whole welter of reasons for the economic stress of the past five years had been advanced, but the fundamental trouble was that prices and production costs had been made almost irreconcilable, said Mi\ Herman Seifert, of Opilci, when addressing the Citizens’ Lunch Club yesterday under the title of “Capital, Production and Distribution. ”

An alternative title, said Air. Seilert, would bo “capital production and capital destruction,’’ which in the past few years had been stupendous, apart from fortuitous circumstances such as wars and earthquakes. The financial value of productive property to-day was something quite different from its economic or intrinsic value, or the effort needed to create it. Financial values had been put in the molting pot, and real values had suffered equally with fictitious values. It was probable that the present slump in real values was due to the effort being made to support fictitious values and collect interest on them. Millions Lose Every Penny.

The last 15 years had witnessed perhaps the greatest financial revolution of history. Alillions had lost their every penny, lifetime savings had disappeared, vast numbers wore dependent on charity for the first necessities of life. Almost every country had suffered these ills, and scarcely an individual had escaped without loss in some measure. What had happened to cause this financial upheaval? All sorts or seasons had been attributed, and manifold cures proposed. “I don’s believe shortage of money caused the slump, nor will a plentiful supply cure it; it was not caused by the long hours of workers, nor will shorter hours cure it; it was not caused by high interest rates, nor will lower rates cure it; it was not caused by labour-saving machinery, nor will a return to pick, shovel and hand loom provide a cure. ‘ ‘ The world slump was caused by

the wholesale destruction of capital values owing to failure to recover costs in prices. Prices do not matter if costs are in proportion. It does not matter to a dairy farmer if he produces butterfat at sixpence or five shillings a pound if costs are proportionate.’’ Air. Seifert hypothecated a number of examples to show the effects on capital value of relative reductions in interest, wages, the cost of goods and services, and prices. Discussing the actualities of the position, he siJid: “We have to face the reduction in prices that has faced the dairy farmer and tko wooigrower. Year after year passes without improvement, and the outlook is not getting brighter. Theii prices have been reduced about 50 pel cent, and costs only about 15 per cent. Unless this state of affairs is altered, insolvency is a certain consequence. Producing for an overseas market where prices aro low, farmer cannot transfer this discrepancy of price and cost. If the debtor cannot pay, then the debt is settled either by compromise or bankruptcy. The first call on reduced prices of 50 per cent, is living expenses, next the cost of goods and services, and finally interest. If this cannot be paid there is no financial value, and the property is not likely to be maintained. “Some earned that others could spend; some worked that others could rest, and where have we landed?’’ concluded Air. Seifert.

Dr. S. F. Hunter, of Dunedin, was welcomed as a visitor to the club. Air. N. S. Mountain presided and voiced the club’s thanks to the speaker.