RURAL CREDIT.

Otago Witness, Issue 3595, 6 February 1923, Page 10

RURAL CREDIT.

7o,tr^- ef Su ’ rve Y of Rural Credit in New , '' vas the subject of a paper ancUread I A''’ 0 Canterbury professors, h W.frf the recent Science Congress fort tA ng ° n ;u n : ere is nofc much com- .. . « gathered from the summarised the f cume our way, although Wnr n at - , the existmg features and risks of the present system g ving credit were stressed may well tion e of UI f 6d aS Well Worth the consideratmn of farmers, after such a period of gambling in interests pertaining to country hte as we have lust experienced. The P T„ nt economic position, despite the welcome revival, ha.s in it it was held anS* W w Ch Sh ° uld considerable “ , „ /' re . ls , a P re guant passage: j ®. a re ®ult of the post-war boom following upon the prosperous war period followed 20 years of almost credit n| ed - P ? Sp ? rity ’ the various havA\ agencie * the Government) have been so free in then financing of armers that the chief industries of the Dominion were in many cases seriously over-capitalised. The heavy and growing harden of the Public Debt was paralleled by the great amount of mortgages owing to w uch must be added the Substantial p 6S Wh \ ch are secured in other ways than by mortgage. Tlie prospect was un-=nffla-n ’ t b * Ut th< i condltl °n of Europe was sufficient to make it dear that there can be no immediate return to pre-war prospenty, which depended upon a constantly rismg price level. The present indications were rather for a generally falling tendency of the price level, and that the present welcome reaction from the unnaturally low level of prices in the panic stage of the crisis cannot long be maintained. The conclusion arrived at was that, since it was clear that the rual industries are suffering not so much from a shortage of credit at the moment ap from unsound finances resulting from too much credit in the immediate past, no economist can veiw wtih equanimity schemes which offer even a 'danger of further inflation of credit.” The foregoing seems to us to present a correct view of the position, and yet—but read Mr W. J. Poison s (Dominion President of the New Zealand Fanners’ Union) letter to the Dominion: “There is an old saying that an ounce of practice is worth a pound of theory and when I I saw the summary in Tuesday s Dominion of the paper read to the Science Congress on rural credit by two learned professors, I realised more than ever the truth of the adage. ‘ The scheme for rural credit associations, while admirable, within limits,’ these gentlemen are reported to have stated, ‘ could do little or nothing to assist the present difficulties.’ I assume that they are referring to the Farmers’ Union scheme. besca.u&e although the statement is literally true of the Act passed bv the Government last session, that measure has not been taken seriously enough by anyone to warrant the attention of "such an important gathering as the Science Congress. So far as I am aware, there is no other scheme receiving consideration from the public at the present time. If I am wrong in this supposition, 1 can only express regret ; but if I am right, the professional experts have an entire misunderstanding of the whole position. The necessity for agricultural banks—and the Advances to Settlers Department, which the Government is at present busily enlarging, is an inferior form of agricultural bank, with the doubtful addition that it lends on comparatively rickety chattels security—exists largely because of the nature of the credit which in the past, has been extended to farmers. Will the learned professors defend the three to five years’ mortgage system so prevalent in New Zealand against an amortisation system ? The opponents of agricultural hanking, recruited chiefly from the financial element of the community, have adduced many remarkable arguments, hut there has never been one of them audacious enough to attack the principle of amortisation. But the most cogent argument in favour of the immediate establishment of avrieultural banking lias been entirely overlooked bv the professors—the moratorium. It is difficult to estimate how many millions will he required when the moratorium is lifted, bv borrowers anxious to renew: but it is undoubted that the amount will he enormous. Docs any one suggest that these loans should not be renewed? 'Lhev must be renewed if the mortgagors are to survive, and the learned professors will surely not suggest that it- will help the situation to abandon them to their fate. Ha lo these scientific men studied the ’-evil cr r ’ : t P' .stem of the world in comparison with our present

mortgage system? Do they realise that not only is the present system very much more costly to the borrower, but that it deprives him of the opportunity ol making his land his bank by paying off his mortgage in instalments? We have had experience of what happens when times are good. The farmer becomes the possessor of a credit balance, and he buys a motor car or share's in a so-called cooperative company or increases his obligations by purchasing more land—because the mortgagee won’t allow him to pay off his mortgage when it suits him. That is why wo want an amortisation system in New Zealand, and amortisation is the secret of the success of agricultural banking, although that success is greatly enhanced by the cheapness with which the banks are worked, the elimination of orofit and the additional safety created by the pooling of securities. With agricultural banking triumphantlv successful all over the- world, and even next door in Australia, where in 18 months it has created conditions for the producer of New South Wales such as he never hoped for under the old system, it is a tiifle late for academic discussions and theoretical treatises on the disadvantages of rural credit.”