Poverty Bay Herald. PUBLISHED EVERY EVENING GISBORNE, MONDAY, SEPT. 17, 1934. THE MONETARY REPORT

Poverty Bay Herald, Volume LXI, Issue 18504, 17 September 1934, Page 6

Poverty Bay Herald. PUBLISHED EVERY EVENING GISBORNE, MONDAY, SEPT. 17, 1934. THE MONETARY REPORT

In sonic respects it may seem that little has been gained as a result of the comprehensive inquiry and lengthy report of the committee appointed to investigate the monetary .system of the Dominion; but, on the other hand, it certainly can be claimed that a good deal has been accomplished in the. direction of removing misconceptions, not only regarding the present system, but also in connection with alternative theories that have been advanced. The committee heard voluminous evidence from all quarters and allowed the witnesses complete freedom in elaborating ’ their ideas, so that its members were in a position, to make a dispassionate review after considering tho various issues from every angle. And the chief result of this comprehensive study is the vindication of the monetary policy that has been evolved over a long period of years to meet iho exacting requirements of modern industrial and commercial. practice. Such a finding was not unexpected, because similar results have attended investigations by Royal Commissions in both Great Britain and Canada. It is not without significance that, every impartial inquiry that has been conducted into this involved question has concluded that, while they may not be entirely free from defects, the present monetary standards are infinitely preferable to any of the purely theoretical substitutes that have been submitted. It was possible, of course, that it might have been found advisable to recommend some changes in internal practices, and it is true that the committee has suggested some minor alterations, but these, almost without exception, relate only to details of procedure, and do not in any way suggest any inherent defect in the system itself. The report, emphasises the need for a sound monetary policy, but points out that even the best policies or systems cannot prevent serious disorganisation arising from unsound economic policies or lack of balance in production. An an attempt to distinguish between cause and effect, tho committee points out that it. was admitted on all sides that it was the heavy fall in the prices obtained overseas for the Dominion’s exports that brought the economic depression to New Zealand. 'l’ll is being the case, the committee is inevitably forced to the conclusion that, whatever tho cause of the fall in world prices, it obviously was not due to any failure on the part of the Dominion’s monetary system. This is a point that is rightly stressed in the report, for it is obvious that this country cannot dictate the monetary policy of Great Britain or any oilier foreign nnlion, however much wo might be affected bv the. consequences of action taken bv them. Attention is also directed to the international influence on currency ami credit. It is explained that money is merely an equivalent of goods and services, and, consequently, that tho money available must be governed by the effective demand for goods and services; and that demand, in the main, does not originate) in the Dominion itself, but overseas. ( The volume of credit within New Zealand is regulated by the volume of trade, and since, for reasons entirely beyond onr own control, there has been a diminution of trade, ft reduction in credit is automatic and inevitable. These are the basic conclusions readied by (he committee, and it lias con-fc-ise 1 its inability to discover any practical means whereby the natural

order of things can be reversed and the currency and banking system adapted to control the economic system, instead of vice versa. It is true that a minority report contends that the control of currency and credit should be created by the .Stale, and that, “insofar as the physical resources of the Dominion will provide,” credit should be created for the purpose of closing the gap between production and consumption. It is diflieult to see, however, the real difference between this plan and the system now in operation, for surely the value of the resources of tlie Dominion is controlled by the prices paid on the overseas markets. In other words, while it might be possible for u.s to regulate the production of our own country, we cannot possibly exert any influence on the consumptive capacity of the world, and it is the consumption of our goods, and not the mere production of them, that creates legitimate credit- and purchasing power. The minority report, in another part:, draws attention to this very point, for it is assorted that, through a fall in overseas prices our producers suffered a loss of income ot more, than £20,000.0110, and the reverberations from this caused a fall in the national income of £1)0,000,000 per annum. The report contends that a monetary policy for the Dominion should be free and unfettered from overseas domination; but. since the Dominion is, and must be, dependent upon overseas markets, how can this objective possibly be achieved? The minority report neglects to answer thi s all-important question. Throughout both this and the main report are many evidences of attempts to find some means of increasing credit and the flow of money, but it is clear that all sections of the committee, although they might not expressly say so, were forced back upon the conclusion enunciated by Mr. Downie Stewart that, “it is not credit that is lacking, but adequate overseas markets,” And this, in the final analysis, must be accepted as the crux of the whole posi tion. Whatever may be said of the banking methods, purchasing power, internal price levels, and various other factors, however great may be the defects and deficiencies in them, however much they be adjusted or adapted, nothing can alter the fact that they are incidental to the one great governing influence of world prices. To paraphrase the conclusion reached >v Mr. Downio Stewart—and it seems to be so logical that it might almost |, O accepted as axiomatic —whatever monetary factors in other countries may be at fault, New Zealand’s crisis is not a money crisis, but a market crisis, and if that problem is solved tin; apparent, money problem will solve itself, but not otherwise.