OUR GAME OF CHESS Truth

NZ Truth, Issue 978, 23 August 1924, Page 4

OUR GAME OF CHESS

IS IT REALLY BEING PLAYED IN 1 • ... LONDON? \ Shall the Government continue to protect jthe borrower from the lender, or shall the Government leave borrower, and lender, to fight it out under, the conditions of a return to the gold standard, which will give" the lender a great advantage?— and which will, as far as can be seen, increase the burden of debts,- raise interest to new borrowers, and,, generally speaking, deflate the inflated at a very rapid rate. The moratorium is a legal protection —a candid' interfei-ehce \vith contracts —designed- to ;help 'certain borrowers who) are believe;^ Ito1 to .be unable, : m the present conditions of.; partial/ deflation; to repay the principal. And whp, m a complete and rapid- deflation, would W still less able to keep their financial engagement. , :: !. :i So far as concerns the limited commitments (an unknown quantity, oe - cause of statistical defect) under the moratorium, the Government stands for almost complete deflation — mitigated merely by a remaining right of the mortgagor (instead of, as now, the mortgagee) to appeal to the Supreme Court. So far as general deflation, and a return to the gold standard, are concerned, Mr. Massey remains as the Sphinx. He is the last man to attempt to follow Parliament's only financial mountaineer, Rollestpn, up to the pinnacles and precipices. !i :: 11 . All the same, Massey la carefully scanning those financial pinnacles with his telescope, which is trained upon the world's statesmen-economists, assembled m conference to straighten out the reparations' and debts complexity. The hardest mountaineers of Britain, America, and Europe a*£ even now engaged on a thrilling and perilous quest, roped together by their mutual debts, which may either save them or hang them. •..."'■ :: ", »• Out of the agreement (if it Is ?t last agreement) of these world-repre-sentatives will come the new policy. At all events, Massey's ideas of the degree and speed of deflation will certainly be determined by the Old World agreement and its implications and consequences. . :: it II So much for the general issue. Meanwhile, the Government and Parliament of New Zealand are trying to do something on their own account to deal with the comparatively small, and yet large enough, portion of the problem represented by New Zealand's limited moratorium. : : ■ : : , i J . "While the Government, as stated, is prepared to drop the moratorium, subject to the mortgagor's right of appeal for two years,' Mr. Wilford has moved a defeated amendment m favor of doing nothing for eighteen months. Labor goes still farther m the way of protecting the debtor,_by moving an amendment committing the Government to come to his rescue to the extent of a maximum expenditure of six millions a year. This amendment Is worth 'studying. . "When Labor comes m with its six millions a year, it will first of all deter- j mine (by means of special boards) the "real value" of tho mortgaged properties (that is, the real value at time of valuation, regardless of any fall In value that may subsequently occur as a result of general deflation throughout tho world). Labor's amendment is not a model of lucidity, but it appears to mean that If a mortgagee has lent £1000 to. the mortgagor, and the State finds that the "real value" Is £700, then the mortgagee shall bo paid £700 (this is what tho six millions are for) and the State will take over the mortgagee's whole right la tho land, and the mort-

gagor will pay interest to the State on the "real value" of £ 700 instead of ».n the £.1000 lent by the mortgagee.

But' the mortgagee may say: "Give; me the land instead of the £700." In j that case, the mortgagee, if he is "a practical farmer" and willing to farm, will be permitted, under this Labor amendment, to apply for possession of the land, and possession may be granted to him, provided that he pay to the mortgagor equitable consideration for improvements made or money- deposits paid by the mortgagor. Again, where the State does not buy out the mortgagee at "real value," and where the mortgagee does not gain possession, the mortgagor continues, m possession paying interest on the real value; m which' case, m a, time of deflation, .the mortgagor 'gets relief at the expense of the mortgagee, ■•■•■ l*'' : * : : Clearly, then, the Labor amendment, is m the direction of protecting the borrower even more than deflation m general is m the direction of protecting the lender. "While the Government would allow deflation to find automatically the real value, with a minimum of State interference, Labor would support its estimated "real value" with State loans, depriving v the lender of such of his loan as exceeds the "real value.", Thus the lender would lose, but there fs no certainty that the State would not also lose, because, if deflation (m the sense of falling prices) is to continue for years to come, "the real value" (estimated) of to-day may* be the inflated value of next year. s: :: • :: * And that leads up to a peculiar phase of latter-day deliberations. The question is often heard: "Should the Government put a check on deflation?" But is it not also well to give some thought to another question? That question is: "CAN the Government put||a check on deflation?" If, according to the Labor figures, it may take six millions' a year to support the "real values" of the restricted number of properties under the moratorium, how many millions of Government money would it take to perform the same service for land all round, and can the Government find the money? :: ?! •• How would the Government find the credit? Only by borrowing. And would the London moneylender continue to supply money to a Government that commandeers land, depriving the mortgagee of part of his interest? For less than that, London stopped Queensland Theodore's credit. And Theodore skied the towel. Already It Is complained that N«w Zealand money is going to Australia for investment, because better interestcan be obtained there. It is easy enough to put restrictions on moneylending. But it is hard to prevent a lender front sending his money where he will, and It is hard to do, without the local lender when the oversea lender is on strike. For this and other reasons, the cry of the stabilisers that the dropping- of the moratorium will "raise interest" is not" convincing. Is not a rise m interest, caused by things mucK wider than the moratorium, inevitable? Is the prospect of the expiry of the moratorium the driving force behind the Interest rate, or has an impending rise m interest sounded the death-knell of the moratorium? II '-'• t! , Deflation, with its crucifixion of the debtor, naa "some appalling aspects. And stabilisation, with its idea of fair play between debtor and creditor, I is attractive. But how? Can thestabilisers find a way? And, after >tll, is not our financial fato being dictated m the o}d [World?