EXCHANGE POSITION.

New Zealand Herald, Volume LXIX, Issue 21117, 26 February 1932, Page 11

EXCHANGE POSITION.

FARMERS' POINT OF VIEW.

REPLY'TO BANK CHAIRMAN. RATIONING OF IMPORTS. A statement has been issued by the Farmers' Exchange Committee as a reply to the recent announcement by Mr. J. T. Grose of the views of the Associated Banks upon the exchange position. "We have no quarrel with the banks," says the committee. " Our quarrel is with the Government, which has attempted to solve its difficulties by taking the primary producers' property at a price to be fixed by a third party (the banks) without the primary producers having any say in tho price, or being consulted in any way." Hie committeo expresses agreement with Mr. Groso's statement that the 10 per cent, rate charged during 1931 was a true and fair rate aud in accordance with the requirements of supply and demand during that year. "We would like to point out, however, that the supply of London exchange was increased during 1931 by the £5,000,000 three years London loan and by the issue of £4,000,000 of Treasury hills. But for the issue of these loans tho supply of London exchange would have been £9,000,000 less. This must have had its effect on the exchange market. For the current year the Government, instead of borrowing £9,000,000 in London, will have to repay £4,000,000. The Government requirements in London for 1932 are, therefore, £13,000,000 greater than they were in 1931."

Referring to Mr. Grose's estimate that the trade balance this year will bo £14,000,000, tho committee says the estimate may very likely be right if the present Order-in-Council remains, because this order enables tho banks to make their estimates work out correctly through the power given them to ration imports, a power which it is common knowledge they are using at tho present moment. " Formerly, if an importer could not obtain the London exchange he required from his banker, ho could go on to the open market and purchase his requirements there," says tho committee. "Under the compulsory exchange pool he cannot do this. The bankers' decision is final. Without his banker's permission no one can import. The demand for the farmers' drafts is reduced to tho amount fixed by the banks, under probably pressure from the Treasury, and the law of supply and demand in a free market is no longer operating." In a closing paragraph, tho committee declares that this is the first time on record that ' any Government in the British Empire has taken the products of a large section of the community without consulting the people who own the produce and without giving them any say in the price. No other section of the British Empire has done such a thing. Australia let its exchange go first to 30 per cent., and now 25 per cent, and is meeting its oversea debt payments on this basis, and the general Australian opinion is that the result is a benefit to Australia as its export producers are thereby enabled to pay their way. Great Britain has let its exchange go to 30 per cent, and is meeting its American debt payments on this basis. The general British opinion is that the change has benefited Britain, as it has enabled her export industries to pay their way."