SENSE OF VALUE LOST

Taranaki Daily News, 19 December 1929, Page 7

SENSE OF VALUE LOST

INFLATION OF SECURITIES FALL IN PRICES COMMENCES. DEFLATION OF' REAL ESTATE. (From Our Own Correspondent). Wellington, Dec. 10. Ever since the war the world seems to have lost all sense of values, and it is considered rank pessimism to even suggest that values of securities, of properties, of commodities and services are all too high. There is a belief, and a foolish one, that the war by some occult means has brought about a radical change in economic laws. We are told that we are living in a new era, necessitating the scrapping of hoary economic rules. In this new era two and two do not make four but five, and the world has gone crazy over this discovery.

For three years the Americans had a wholesome regard for the -new, economics of the new era and their attachment to the new belief was exemplified in the prolonged and intense speculation in which the whole country participated. This speculation was carried to such extreme lengths that the returns on some share investments did not amount to more than 1} to 2 per cent. The sobered American speculators now admit that the old laws of economics stil.l hold good and that two and two make four and not five.

But share gambling was not the monopoly of New York, for there has been extensive Speculation in London, Paris, Berlin, Amsterdam and other centres. In Australia and New Zealand the same thing is to be noted, though it has been on a smaller scale. For the past 18 months the stock exchanges have been busy, and an increasing number of men with funds have turned to the stock exchange for investment. Now 4n all the centres mentioned values have been depressed and: prices have declined. In Australia and New Zealand, the recession has not gone as far as it must go, and this is not a prediction but an obvious inference to be deduced from prevailing conditions. In the coming year the values of all kinds of securities, gilt-edged or otherwise, are bound to be lower than they are at present. Mr. G. Creagh, chairman of the Auckland Stock Exchange, in his address at the annual meeting declared that he saw no reason for despondency, and every one will agree with him. Despondency is fatal. But it was not despondency that was meant but pessimism, for he wished to strike the optimistic note. The role of the optimist is an easy one; anyone can be an optimist, for he has merely to make some insane remrak such as “Things might be worse.” So far as the depression which had recently been affecting the Australian and New Zealand markets was concerned, he was of opinion that the policy of rushing out of good and well-tried investments at the present time was not always the wisest. It is difficult to know exactly what is l meant by this, and especially the expression “well tried investments.” We have no doubt that bank shares would come under this definition, and these well tried shares are having their values chipped each week as investors begin to realise that share values liave been boosted to beyond their true or intrinsic worth and they are now coming down to their proper level. This is not despondency, but a recovery of business sanity? But stock exchange securities are not the only ones that, are now suffering from the effects of past inflation,- for real estate is in the same position. According to the president of the Real Estate Institute in Canterbury, house, properties had declined in value by from 20 to 25 per cent, in the last two •years. A house worth £2OOO two years ago might now be bought for £l5OO, and he added that directly people came to realise that property values are at rock bottom they wlil be inclined to take more interest in the buying of houses." But have values reached rock bottom? In the opinion of veterans of the real estate market values..are by no means near rock bottom, and although there has been some decline values are still inflated. Some consider that next year will be testing- time for securities of all kinds, and particularly for real estate. In most places buildings, both commercial and residential, have been erected in excess of the economic needs of the country, and. it is inevitable that values must decline. The fall in values is- not to .be regretted, for it will /be an indication that ( the people are recovering their, sense of value and their sense of humour. For it -will be humorous to look back on the dazzling values of the past. The sharebroker and the land agent. are likely to find 1930 a difficult year. r .