THE BRIGHTER SIDE.

New Zealand Herald, Volume LXVII, Issue 20744, 11 December 1930, Page 17

THE BRIGHTER SIDE.

VIRTUES OF DEPRESSION.

"NOT A PERIOD FOR PESSIMISM"

PREVIOUS LESSONS HEEDED.

Depression in trade* and industry, such as the Dominion is now experiencing, is not. wholly harmful, and a round of Auckland business houses yesterday revealed the fact that there is little inclination to adopt a fatalistic attitude. That times are bad cannot, well be disguised, but a reassuring factor in the present situation is that commercial men, alert to the signs of the times, have not been caught completely off their guard as business fell from excessive heights to normal and below. The lessons of the past have not gone unheeded, with the result that business generally is in a much bettor financial position to meet, the shock of falling prices than was the case, for instance, during the slump of 1921-22. A leading man in the city, asked to interpret, the spirit in which the heads of business houses are facing the now position, did not attempt to belittle the present difficulties. Nevertheless, he expressed the settled conviction that it was not a time for pessimism. Rather should the pessimistic view be preached and practised in days of prosperity. Depressions and booms came in cycles. Therefore, was it not wise in the day of prosperity to take careful thought for the morrow, and, similarly, when the sun was not shining, to anticipate with optimism the brighter day in prospect? Not Caught With Heavy Stocks.

There was a boom in the early postwar years, and there was little adequate preparation for the leaner times that followed. Business houses were caught with large stocks on hand, and losses were considerable. But when the latest storm-clouds gathered, business men were quicker to heed the warning and run for shelter. Compared with 1921, one large business house in Auckland has barely half the stock to-day it carried then, and yet last month's turnover was equal to "that in the halcyon days of 1920. Further than that, returns taken out for the first nine days of December show that there has been a. slight accession of business over that recorded during the corresponding period a year ago. It is true, of course, that retail businesses do not feel the pinch of depression so keenly as the man on the land. Money may be shorter, but there aro some necessaries of life that still have to be purchased. For instance, the price of butter or of wool may drop 50 per cent., but it is not likely that the volume of retail business will drop in anything like that ratio. In a country with New Zealand's occupational composition, it is almost inevitable that the farmer should suffer more acutely than the general run of the population. Philosophy of the Farmer.

Nevertheless, in spite of the inevitable " croakers," the farmer is shouldering his burden with a fair degree of philosophy. " I have sold better butter for fivepenca a pound, and I have sold better wool fo" threepence a- pound.' said a veteran Thames Valley farmer in a wistful contemplation of current values for primary products. The opinion was expressed by a city man. whose business brings him in constant contact with the agricultural community, that the clamour for a moratorium is mistimed. He did not believe the average mortgagee was in any case anxious to foreclose. The case of a farmer with a £3OOO mortgage on his property recently came under the business man's notice. The farmer said he would have to leave his holding. The mortgagee replied that he was willing to allow the farmer to remain on payment of nominal interest. "What do you call nominal interest V 9 asked the fai*rrier. " One per cent.," the mortgagee replied. The farmer will carry on for another year on those conditions.

Wages and Interest Rates. One effect of the depression has apparently been to focus keener attention on the expediency, or otherwise, of political action to redress the present economic ills. Labour costs are said to be disproportionately high- One view heard yesterday was that the whole onus should not be thrown on the Arbitration Couit lb was urged that the Government should take the whole initiative, that all salaries and wages should be equitably reduced, and that simultaneous reductions should be made in rents and interest rates. It is known that the Government does not desire to convene a special session in February, but one competent observer argued that the expediency of such a course would be forced on the Government by the urgent necessity for economic readjustments. It is generally believed that the piediction made soon after the war that a new level of permanently higher puces had arrived has been falsified, and that prices are now, in fact, on a Jong; run toward a. lower basis. Periods of boom and slump recur, but carefully-compiled statistical evidence points to tho conclusion that each recovery from a depression emerges at a, slightly lower level. It, may be possible, by prudent management, to modify the heights of overexpansion and the depths of depression so that, in effect, the sharp rises and falls can be "ironed out." Opportunities in Dull Days. A case in point, was cited by a business man yesterday. In prosperous times, he pointed out, a lending institution would advance to the extent of two-thirds. of the value of a house property, but dunng a depression only one-half the value was advanced. Taking the case of a property valued at, £3OOO in a period of inflation, an advance of £2OOO would be made. However. if the value dropped to £2OOO, only £IOOO would be lent. If the reverse policy were followed, the "boom day advance would be £ISOO and the dull dav" loan £1333. it, might bo argued that in the slump period the institution did not have as much money available, but, ,f care were practised in the prosperous penod cient resources would be harboured to meet the calls made when times are dull How long the depression will last it is impossible to. predict. One reliable American authority, Roger W. Babson, estimates that the slump has run 401 per rent, of its course, there, but ho holds out th« hope that, there will be considerable. improvements in intermediate movements. "Do not let the depression complex get hold of you any more tnan you should Wave allowed yourself to succumb to the new era fad oi permanently higher prices," he says, in a summary of the outlook. eiiocis Oi ce pression have their opportunities, one ot the greatest of which, from the invest merit viewpoint, is the time for the purchase of stocks to be held. Usually this opportunity comes in the earlier part ot a period of depression."