Parr On "Rotten Securities"

NZ Truth, Issue 973, 19 July 1924, Page 1

Parr On " Rotten Securities"

Propped-Up y 'Valos x Is A Further Supply Of Cheap Money The Cure Fop Inflation? And, If So; Is The State To Undertake The Whole Burden Of Rural Lending ? Government money-lending on rural -securities has reached a point at which the Government {tiust either go back or. go - forward. * , The maintenance of rural values requires a great deal of " v low-priced . advances that private . money-lenders will not supply; and the Government, if it believes these values to be eco- .-■ nomic, must be prepared to find — goodness knows where—millions of cheap money. Opinions are divided as to whether the cure for the present situation is more credit or less credit. Last week in.tjie House of Representatives, Mr. Parr spoke more plainly than is' Ministers' usual practice.

All parties are agreed that the cost of production must be reduced. But every person who talks like this refers to other people's cost 'of productidn, not to his own. Amid all the blither of the no-con-fidence debate (which was 90 per cent, a quarrel between the 8111-ites* and the Tom'-ites over political, preferment) Minister for Education Parr managed to get m one sentence that, really said something. , He said that the mortgages affected by the moratorium" were largely based, on "securities so rotten that no financial man: would look at them" — securities resulting from "gross inflation and mad : speculation." Was it. (he asked) suggested that k the Government should take over "these rotten securities"? ' '-. ' "Protect the Shorn Lambs." But the same Reform newspaper that reported Pah: In the. above strain also published on the same page two letters from farmers - arguing that the mortgagors vrhp y have, borrowed on these tllleged "rotten- securities"— -ex f cep.t a few: of ; the^rott'enest- I—"are1 — "are making good," and "wili continue to make ■■good if ■ajtobr.ißudden. lifting, of . the moratbrium'dberhqt throw them to the wolves— ile^*. tb the; money- lenders and ba&fy& i : i„.i.:..y^,y^ This conflict of utterance throws' up the only, question that really counts, at the moment: \ " ; Will further credit at AYz per cent, enable the farmer to re-establish ;h is solvency, or has the farmer received,; too -much credit, causing ,*an uneconomic inflation, the only cure for; which is a burdening of t credit and "survival of the fittest"?^ To put the question m another way, perhaps more concise: - . Has cheap money caused dear land, . and is dear money the only practicable means of getting '. back to reasonably-priced land? This question is so grave amd so urgent that the politicians who, from behind different (but meaningless) labels, waste time with childish "back-slack," are oh a level m depravity with the Nero whb fiddled during the burning of Rome. State as Sole Lender! The Government created the moratorium — under the excuse of a war measure — m order to protect mortgagor farmers. The Qovernment—composed of tho very men who opposed Ward's cheap money policy— } 9 lending money to farmers ' at 4% per cent. Limited by moratorium, and , under-

; qubted by the lending, Government, the ; ordinary money-lender has quitted the i field and left the Government to it , Result — -the Government is rushed with loan applications ridiculously in^ excess of its money resourcesi What is to be done? Should the i Government— having for the 'time being ousted the private money-lender or . farm securities— continue its march . and undertake to supply all the credit a farmer requires, according to: the : farmers' present notion of values? Ii that is. to be the policy, "then the Ad- : vances Qffice will have to grow intc i some great agricultural banking sysi tern; ;arid hpw it will get enough 4% per cent, money (after it has. sucked tho $*ost Office Savings Bank dry) without incurring impossible losses, nc one bn earth can say. Though he hat avoided all committal remarks like thai ; of ' Parr,* Mr., Massey has implied; hie i unwillingness to make the Government the sole and sufficient mbney-lendei i for over-valued rural New Zeaiarid. •' But the Government has already gone so far that it cannot for long remain "where it is. It must either gc forward; or go back. , "; '.'..':> 1 Deflation in' the Old Sense. -^ / Going back means adopting a policy to enpou»jte^the^.privfttei_^M^yjl!6n'doi ;. to cßme^ptoxtKe ruratrpusmess again But the only way to encourage the private, nlbney-iender is to free him from such hobbles als moratoriums, ano tc let him kill inflation by the method Which the, money-lender has always used to slay 1 the • unfit- I—that1 — that is, by raising the rate of Interest. Such a deflation is just what the farmer, ir his present mood, won't, stand; for; and what the Reform Government mosl fears is a Country Party. Deflation is still the real skeleton iri tho cupboard, but (except when a Minister speaks as Parr " spoke last week) the cupboard door is generally kept closed, and a Babel of Bill-ishis and Tom-isms serves to distract the public mind from the real issue. ! While Mr. Parr may have hearkened . to the "supply and demand school' ' that is preaching free trade m monej ' as the corrective of artificial values ir ' Wnd, farmers (who are free traders only when lt suits them) are protesting against an immediate withdrawal of the moratorium. The idea behind that policy, according to the farmei ' critics' of Parr, is merely to give lane values a knocli "to suit a certain section of financiers." [ Farmer and Banker. Successive Bank of New Zealand chairmen have preached the need oi

•< — - .- . . t reduction m the price of land. "Nof so^much m the price of land," retorts l the farmer, "as ip banking profits made l out of the land." Proving again that : there is general agreement as to the : ' need of deflatiori— by the other fellow! i B.N.Z. Chairman Watson protests i against "legislative interference" with trade — only to be referred by his adI versary to the legislative. Interference * that, saved the B.N.Z. m the 'nineties. ■ 'And so it goes on— mutual accusai tions on the lines of the pot and the ) kettle; attacks on land prices, couriter- . attacks . on bank profits, etc., etc. I And meanwhile the. politicians m 1 Parliament Building go on fiddling — all : except Parr, who will probably be i wigged by the Prime Minister for what . he said about rotten securities. - But thank' goodness that somebody said something, even if it was said by misadventure! 1 No real problem was ever evolved by C "Hush-hush" and by "Wait-and-See."