NOT MONETARY

Nelson Evening Mail, Volume LXVI, 20 April 1934, Page 2

NOT MONETARY

CAUSES OF DEPRESSION COMMERCIAL OPINION (Special to “Th© Mail”) WELLINGTON, 20th April. The following .statement has been made to the Parliamentary Monetary Committee by the. Associated Chambers of Commerce of New Zealand : “The view of the commercial community, as represented hv the Associated Chambers of Commerce, with regard to the inquiry being undertaken by the Monetary Committee, may he briefly set out as under: — (1) The primary causes of the present economic stress arise from conditions which are beyond the control of the monetary system, such as economic nationalism; war debts arid reparations; political inflation of currencies during the war and after; tariffs and their effect on international trade. (2) The confidence of the commercial community in the banking system of this country lias not been shaken, and we are confident that it can and will adapt itself wherever necessary to any changes that may occur in the development of industry and commerce whether local or international. (3) Except so far as changes may he necessary in she circumstances suggested in th 3 •preceding paragraph, the commercial community is not prepared to forego the present system • in favour of some new system that is unable to command tlie same confidence. Factors distinct from the operation of the monetary system which have to he borne in mind in connection with present conditions in New Zealand are—(l) We have suffered a severe drop in tlie prices we receive for our produce sold overseas, the proceeds from which are the chief factor in our prosperity. Our interests are therefore interlocked with economic conditions overseas.

(2) Government and local body borrowing has for years constituted no small part of what we have regarded as our income, and this source of supply lias now been seriously curtailed. (3) Over-borrowing and over-spending by the public authorities, by private enterprise, and by individuals, aided in some directions hv an over-extension of credit facilities, have resulted in the inflation of almost all kinds of assets beyond their real value, and much harm has resulted from the efforts which have been made to sustain these false values. Monetary Measures: (1) The majority of the monetary reform schemes that are being propounded are variations of inflation in one form or another, and it is unnecessary to remind the committee how impossible it is to control inflation so as to avoid the disastrous consequences of such a policcy, which are well illustrated by post-war Germany and other Continental countries. My association does not feel called upon to deal with the claims of these schemes, one of which can only he described as plainly confiscatory. The schemes do not, in themselves, impress the commercial community as likely to be efficacious in the important sphere of banking, currency and credit, and they also lack completely that authority that would come from their operation elsewhere.

(2) By no possible method of manipulation of currency can the Dominion break away from the inevitable valuing of its currency in terms of . sterling, in which latter currency payment is made for our exported produce, sterling thereby still determining the basis and value of our income. Further, the large sums payable overseas every year for the service of Now Zealand debts, national, local and personal, form another unbreakable link between sterling and our own currency.’ (3) England has not dabbled in monetary experiments, hut lias adopted certain prgdent modifications of its welltried and almost traditional system to meet unprecedented international monetary conditions over which she herself had no control, and to-day London is more than ever the world’s financial centre.

New Zealand has a system similar to tlie English hanking system, and the manner in which the hanks in New Zealand have functioned throughout an unprecedented depression is ample evidence of their fundamental stability and soundness. The Associated Chambers of Commerce of New Zealand is therefore strongly of opinion that local monetary experiments should not bo tried. Remedies:

Concerning the steps to be taken in our present position in New Zealand : (a) The present values of all inflated assets must be allowed to find their true level in the process of readjustment that has become inevitable as a. result of both the public and the private extravagance of the past. (b) We must guard against further waste and extravagance, balance our budgets, public and personal, and so bring costs into accord with the new standards of values that have been established.

(c) The commercial community believes that the only changes that should be made in the existing system are such as the banks, in consultation with the Government, deem necessary to secure stability of exchange between New Zealand and Great Britain.