The Daily News SATURDAY, SEPTEMBER 15, 1934. MONETARY REFORM.

Taranaki Daily News, 15 September 1934, Page 6

The Daily News

SATURDAY, SEPTEMBER 15, 1934. MONETARY REFORM.

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The report of the Monetary Committee is a voluminous document. It contains the opinions of many sections of political belief, and it is not surprising that the report was not unanimous. There can be no severer criticism of the report than that made by one of the members of the committee, Mr. Downie Stewart, who declined to sign it on the grounds that “it is in many points mischievous and self-con-tradictory.” Mr. Stewart quotes the committee’s own findings, namely, that the cause of the depression in New Zealand was the fall in export prices, and that this disastrous fall “was obviously not due to failure on the part of the New Zealand monetary system,” and, further, that “the committee cannot see how any kind of monetary policy can provide a panacea for the deepseated difficulties that have arisen.” He urges that if these conclusions are sound, and no purely monetary policy can cure depression, most of the report need not have been written. Taking Mr. Stewart’s attitude as that of the Conservative, it is interesting to turn to the memorandum of dissent from the report that was signed by Captain Rushworth and by the Labour members of the committee. They maintain that the non-monetary factors in the depression are a result of the monetary system. The trading banks are their bogey, and they would substitute the power of the State for that of the banks in the control of the volume of currency and credit. Of course the elimination of private interests and sterling restrictions from the Reserve Bank, the definite control of that bank by the Ministry of the day, and the “creation” of money for pensioners, the unemployed, the incapacitated, the consumers and all producers whose price's do not reach pre-depression values are also recommended. There are other suggestions from the Labour Utopia contained in the memorandum, but the foregoing will suffice to indicate the difference between the “Right” and “Left” wings of the .committee. The ordinary citizen is likely to anticipate with some relief that the report proper, the one that is signed by a majority of the committee, may be the safe middle path between two extremes. But perusal of the report is not very satisfying. Mr. Stewart’s charge of irrelevancy is merited, and there is a good deal of the doctrinaire about the whole report. The criticism of the trading banks it contains arouses the ire of Mr. Stewart, and he wholly disagrees with the “novel and unsound lines as to the principles which should govern the relations of the State to the trading banks” advocated in the report. Mr. Stewart’s views on this matter will have many supporters who will contend that insufficient credit has been given those institutions for the manner in which they supported the finances of the Dominion when they were in grave peril. Nor were the trading banks the only organisations which in times of plenty put the accretion of profits for their shareholders as almost the only ideal to be worked for. That attitude permeated commercial life throughout the world, and it was fortunate for New Zealand that in an era when in other lands even banking institutions caught the fever of speculation the trading banks of the Dominion had pursued the prudent course and were able to stand the strain of acute depression. A Government Mortgage Board is recommended to take over the loans administered by the Lands Department, the State ! Advances Office and the Rural Intermediate Credit Board. The ’ board would investigate the pos-

sibility of adjusting mortgage charges to farm returns, at the same time assuring to the mortgagee an even flow of income. There is no reference to any interference with private mortgages by the Mortgage Board, but its establishment is defended on the ground that it would be in the interests of efficiency and economy, and would “spread the risk evenly and equitably in the interests of all concerned.” Centralisation has not always made for economy in administration or for sympathetic handling of local difficulties. However, the merits of such a proposal depend upon the methods of putting it into practice, and of those there is no indication in the report. The majority report urges that a Development Commission or Board of Works be set up to co-operate with the Government, local authorities and the banks to mitigate the effects of booms and slumps, but here again little indication of method is given. The “Douglas Credit” system is discussed at much length, the committee finding that the scheme is illusory, being merely “economics through the wishingglass.” The majority of the committee considers the high exchange should be maintained and the New Zealand pound definitely devalued at the 125 rate in the interests of certainty and economic recovery, with a swing of five points on either side permissible. There is much of interest in the report for the student of public affairs, and it certainly contains an excellent summary of the Dominion’s present monetary system. Yet perusal of it leaves the feeling that the majority report put the matter correctly when it stated that any purely monetary solution of the difficulties that have arisen must be rejected. It is more markets and not more credit that is New Zealand’s greatest need.