THE New Zealand Herald AND DAILY SOUTHERN CROSS SATURDAY, SEPTEMBER 15, 1934 THE MONETARY REPORT

New Zealand Herald, Volume LXXI, Issue 21906, 15 September 1934, Page 12

THE New Zealand Herald AND DAILY SOUTHERN CROSS SATURDAY, SEPTEMBER 15, 1934 THE MONETARY REPORT

The report of the Monetary Committee, at last made available, cannot with any extension of charity or indulgence be regarded as a hopeful contribution toward a solution of the economic or financial difficulties of the times. That fact need cause less disturbance because there was little if any prospect, at the time of the committee's appointment. that it would. When its personnel was announced, it was remarked in comment that there was absolutely no chance of a unanimous finding being reached; and it has proved to be so. When the Committee on Finance and Industry—commonly known as the Macmillan Committee—with 14 members, produced its report, the reservations, addenda and memoranda of dissent numbered 10. The New Zealand Committee, with 11 members, has been satisfied with a main report, an explanatory statement by Mr. Downie Stewart and a memorandum of dissent by the three Labour members and Mr. H. M. Rushworth. Judged by the standard of the British body, it has been moderate. The main report discusses aspects of the monetary, credit and economic structure of the country with a wealth of theoretic illustration that in the retrospect may astonish the six who, by virtue of their signatures, claim it as their own. Mr. Stewart, in the statement explaining why he did not sign, dissects this document rather eaustically, and draws pointed attention to a number of inconsistencies and some absolute contradictions it contains. The memorandum of dissent in large measure reiterates the policy toward money and banking with which the signatories were identified before they were appointed to the committee. Its terms explain, if explanation were needed, why they could not accept the conclusions of the majority. There never was any chance of agreement. In the circumstances the main report and its accompanying recommendations claim chief attention. When the substantive recommendations are examiced they are found to advocate little if any alteration in the monetary system as at present existing. The committee does not agree that the econdmic difficulties of the day are traceable wholly to monetary causes, or to such causes operating in and capable of adjustment within the Dominion. It could not, therefore, present any cut and dried scheme foir a comprehensive change which would banish depression and restore prosperity as by the waving oi a magic wand. It is principally because of its insistence on non-monetary factors as influencing the present situation that the main report parts company with the minority view expressed by the Labour members and Mr. Rushworth. Actually the recommendations refer only in the smaller degree to the actual currency system, that portion of the structure popularly associated with the word money. The suggestion that the gold reserve, now wholly in the possession of the Reserve Bank, should be sold abroad implies divorcing the currency irrevocably from gold. The committee declares that in fact the currency never has been fully on a gold standard, a view expressed before and generally accepted by those who have investigated the facts. Also, since the establishment of the Reserve Bank, gold has become of minor importance legally as cover for the note issue. In principle, therefore, the sale of the metallic reserve is not a proposal of any revolutionary character. In practice, the addition it would make to the

sterling held abroad would be a different matter. The committee is wholly cheerful about this accumulation, now appearing in the balancesheet of the Reserve Bank, but all authorities do not agree, as recent London comment shows. The report further recommends permanent devaluation of the New Zealand currency at the level at which it now stands in relation to sterling. It builds up an elaborate argument to demonstrate that there have been only advantages and no drawbacks in the exchange depreciation and that it should thus be stabilised. In fact it has been, in the meantime, by the declared policy of the Reserve Bank; but everyone will not agree that the last word has been said on the subject. If the currency has not figured to a great extent in the report, the banking system has had its full share of attention. A recommendation that will catch wide attention is that the overdraft rate should be ■il per cent for best accounts, and not more than 5 per cent for any. In view of the present price of money, there is a case for lower rates, and the Minister of Finance has indicated the prospect of a reduction before long. But does the committee suggest legislative action to bring them to the level advocated, and does it suggest there shall be no time limit? In this, and a number of other proposals about banking, the report discusses direct political interference with the working of these institutions in a calm and matter of fact way which scarcely j accords with the supposed views of those who sign it. It raises the question whether these members of Parliament really endorse the wholesale excursion of the Government into the field of private banking which the report discusses with such j

a tone of finality. It is extraordinary, too, that they should have subscribed their names, apparently without reservation, to a document which speaks of the socialisation of deposit banking, and the complete State control of everything, in the. way the report does. Mr. Downie Stewart very rightly draws attention to these features of it, and finds in them a wholly adequate reason for refusing to sign. Possibly the time will come when some of those who did not abstain will wish they had: for. though the report is not likely to have much immediate consequence in action, it is certain to be drawn upon and quoted extensively in argument and controversy. In that event, some of the sentiments wholly favourable to universal planning, to general control of everything, which it contains, will appear to have a strange flavour as endorsed by those who have signed the mam report. In fact, the only brief summing up that can be made of this long and diffuse document is that in tone it is an amazing product of the signatories.