Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, MONDAY, NOV. 28, 1932. THE EXCHANGE ISSUE

Poverty Bay Herald, Volume LIX, Issue 17948, 28 November 1932, Page 4

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, MONDAY, NOV. 28, 1932. THE EXCHANGE ISSUE

In its intimation to the Government that it was not prepared to yield to political pressure to arbitrarily increase the rate of exchange on London, the directorate of tho Bank of Now Zealand made no apology for its firm stand, nor did it attempt to avoid the real issue at stake. The business of the banks, it was stated, was to adjust exchange rates according to the supply and demand of money between London and New Zealand. In other words, the banks, as financial institutions carrying enormous responsibilities, cannot, like politicians, be easily beguiled inlo adopting unorthodox policies or dangerous expedients which do not even attempt to Offer a solution of problems, but are admittedly nothing better than palliatives. It is well that there should be at least this much check on Government activities, for it would bo a sorry clay for the Dominion if it over became possible for politicians to dictate to the financial institutions whose main object, after all, is to-protect the interest's of their shareholders and depositors by safeguarding tho Interests of the whole community. The banks have more to gain than lose by a high rate of exchange and the consequent inflation of land and produce values, and it is a tribute to their commercial integrity that those responsible for banking policy have declined, even under strong pressure, to resort to a scheme which they are convinced would be detrimental to Hie welfare of the Dominion. It may yet be found that the banks will feel constrained in the near future to lower the exchange rate instead- of increasing it, for if the present favorable trade balance continues and capital commences to accumulate unduly in London some steps will be required to adjust tho situa-

tiou. It is possible, moreover, that the regulation of exchange strictly in accord with the supply and demand of funds would he to the ultimate benefit of the Dominion, and not to its detriment as is commonly supposed. The experience of the past month has >shown the Government, and should have convinced it, of the futility oJ adopting expedients which, however attractive they may appear on the surface, must have the ultimate effect of retarding recovery instead of facilitating it. The object of much of the recent legislation, of course, has boon to avoid calling on the people to make sacrifices and suffer hardships, but until it is realised that sacrifices and hardships are an inevitable concomitant of a period of depression, and until they aro accepted with the best grace possible, progress is virtually hopeless. The compromise offer of the Bank of Now Zealand represents another attempt to shirk the issue. It is proposed that a sum of £2,000,000 should bo made available to pay all the current year's rotes of the farming community and to meet their liability for land tax. This scheme has as much ti# commend it. as many others that have been brought forward, but it is not a remedy far the problems of the producers, and it is safe to say that it would never have been suggested by the bank except in the form of an alternative to a scheme that was even more objectionable. The details of the proposal have yet 1o be disclosed, but the assumption is that all farmers will be relieved of their liabilities for rates, irrespective of whether (hey need relief or not, and in order to give them this assistance, the rest of the community will bo called upon to foot the bill, whether or not the taxpayers, as individuals, are in a position to meet it. In actual practice a number of people will receive relief when they do not require it, and many others who can ill-afford the present taxation will be asked to pay more. The concession in connection with the land tax has tlio same objection, there being no provision, apparently, lor discriminating according to the ability of the taxpayer to meet his liability. As a matter of fact there is already power to grant relief from this tax in the case of hardship, and it, does not seem necessary to make a complete cancellation of the current year's debt. The laud tax, of course, has nothing whatever to justify it, but it the Government considers removing it from one section of the community it should remove it from all and, il necessary, replace it with some moi e equitable form of impost. Apart fiom these considerations, the bank’s proposals have the one over-riding objection that they involve borrowing to meet current expenditure, ami this is a policy that is difficult, to. defend under even the difficult circumstances of the present day. The past lew years have witnessed the Government utilising all its reserves .in order to balance, its Budget, and this year the Dominion, for the first time in its history, has deliberately budgeted for a delicit. Now it is proposed to still further postpone the day of reckoning by subsisting on borrowed money. It is true, of course, that drastic ills require drastic remedies, and in the existing circumstances it is not difficult to find excuses for many things. It is well to remember, however, that steps such as those that have already been taken, and others which are now proposed, are not taking the countn any further out of the mire ot the depression, but are, if anything, involving it deeper in it by increasing the burden that will have to be met in tho future. The whole policy of the country at the present time amounts to nothing more nor less than one vast gamble on a general world recovery, and tho measures that have been taken represent only efforts to tide the Dominuion over until that recovery takes place. Time alone will, tell whether or not tlic gamble is justified, but ordinary common sense would seem to suggest that a wiser course would bo to face up to the economic tornado.