AN AVERAGE OF PRICES

New Zealand Herald, Volume LXXIII, Issue 22498, 15 August 1936, Page 17

AN AVERAGE OF PRICES

Sir, —How are we to arrive at tho average of the prices paid over any period if the value of the currency in which the prices were paid varied substantially during that period? We sell our butter for sterling and seven years ago our pound had the same value as the pound sterling. By January, 1931, its value had depreciated in relation to sterling bv 9 per ceut; by January, 1933, it had depreciated in value in relation to sterling by 20 per cent. If we are to use prices as a gauge of tho farmer's position at the present time as compared with his average position during the last eight or ten years, we must, it is clear, take account of tlieso changes in the value of our money. The matter can be made more comprehensible by taking an extreme case. In Germany, when inflation was at its peak, prices were, say, one million times higher than their pre-war level. If. at that time, the German Government, having promised to give farmers prices equal to the average of those ruling over the eight years preceding the war, had given them the average of those prices without allowing for the fact that the money in which they were paid had depreciated in value to one-millionth of the money used before the war, it would surely have been recognised and admitted by all that the farmers had been drawn into hopeless ruin by shameless trickery with words. Tf, on the other hand, the Government, having found the pre-war average prices, multiplied them by one million to give them their original purchasing power it would havo been admitted that it had kept its promise in fact and substance. Similarly, in our case, if, as suggested bv Mr. Coates, the Government found the average of tho prices paid in sterling for our butter over the eight or ten year period and increased it by 25 per cent, the purchasing power received by the farmer would be equal to the average purchasing power he enjoyed through the eight or ten years period. What ought to be paid to farmers may be a matter of opinion, but in this dispute over the correct and honest method of estimating an average of prices, all the honours seem to.be with Mr. Coates, while the statements on this subject made by Mr. Nash and others on the Government side do not give the impression that these wizards of finance have a clear understanding of the problems with which they are dealing. Manurewa. J. Johnstone,