The Temuka Leader TUESDAY, AUGUST 31, 1886. ARE WE INSOLVENT?

Temuka Leader, Issue 1550, 31 August 1886, Page 2

The Temuka Leader TUESDAY, AUGUST 31, 1886. ARE WE INSOLVENT?

To the above quest ion t here can be | given but one answer: We ate not. The colony is worth 40-t in the £, but at the s»me time it must be admitted that we are in a very critical position. We know from experience that it is very difficult to mrke the general reader understand abstruse questions referring to finance, especially when the point of view from which they are discussed is new. Like the hero of Charles Dickens’ Hard Times, they know it is “ all a muddle,” but they cannot fully realise where the muddle begins nor where it ends. To simplify matters, we will suppose that John Brown bought land at £2 per acre, but to improve it he bad to borrow money. He went on improving until at last he found his land worth £lO per acre, and the amount of his indebtedness £5 per acre. At this point no one would lend him another cent, and owing to mismanagement he found be could not make out of the farm sufficient to pay interest on the borrowed capital. John Brown is therefore in this position : He is worth 40s in the £, but he wants money to pay the interest, and he cannot get it, and the result is that the mortgagee seises his property. Of course the reader will say, “ Snch a thing could not occur. If the man were worth 40s in the £ he would get some one to lend him the money to tide over the difficulty.” That is quite true. A farmer thus circumstanced would certainly get some one to lend the money ; but supposing there was only one man from whom be could borrow, and that man refused, what would be the result ? gimply that he would have to go through the Court, although he was worth 40s in the £. Now this illustrates the position of the colony pretty well. We have borrowed money, but our total wealth is about twice the amount of our indebtedness, and nothing is troubling us only that we are not producing out of the soil sufficient to pay our way. We are exactly in the same position that John Brown wag in, only that onr credit has not yet been stopped, but when it is let us not forget that for us there is only one moneylender in the world—that is Londoa f As soon as our credit is stopped in Loudon there is not the slightest prospect of getting money elsewhere. The question therefore is, How long will our credit remain good ? We cannot answer this ; we only know that it ought to have been stopped long ago. In the letter signed J. M, Tworaey, which appeared in the New Zealand Times, and which we published a few issues eg*, it was shown most conclusively that we were going to the bad at tha rate of £4,000,000 a year, and that we were paying this annual deficit out of borrowed money. Now any country whose transactions show such results does not deserve to get credit, for the more it gets the less capable will it be of paying its liabilities. To explain this we shall again have recourse to our friend John Brown, The reason John Brown was not able to pay interest out of his farm was this : He had several strong ablebodied sons who were able to do anything ho required in the way of making farm implements, etc., bat whenever John went to town and saw articles ho wanted he said to himself “ That is cheap at £1 ; it would take one of the boys four days to make it ; it is therefore cheaper to buy it.” In this way John bought away from year’s end to year’s end, with the result that at the end of the year he found that the value of what he bad bought was more than of what he bad sold, and not a single cent remained t« pay interest.' John’s “ boys ” were half their time idle, but he thought as the articles were purchaseable at less than what it would cost to produce them, allowing reasonable wages for making them, that it was cheaper to buy them. Now, that is exactly what we are doing ip this colony) and it is what has dragged us down to our present position, Instead of doing our own work, and keeping the money iu the colony, we are sending it away daily, with the result that we are nearing the fatal hour when our credit will be stopped. In this way we have lost £4?,000,000. Let the reader reflect on this. After all the gold we have dug out of the earth, and all tbs

wool, and all the grain, and all the other tilings we have exported to foreign conntries, our imports have cost £43,000,000 more than what we got from all these. That is, we have lost in this way nearly four Hints as mncli gold as there is in the Bank of England, and nearly twcnij-two times as much gold as there is in the whole of New Zealand put together. Fancy what a country tins would be if we had in it twenty-two times as much gold in it as there is in it at present. This is what we have lost by Freetrade—£43,ooo,oo0 —end it is to it and the absence of a National Bank we owe our depression. Now the question is, Where did we get all this money ? The answer is plain : we borrowed it. We borrowed money in England, and with it paid Englishman for making our boots, and stockings, and shirts, ami trousers, and coats for us, while our own people were making political railways and engaged on other unproductive works in this colony. When Wilkin Micawber gave a note of hand lor the debt which he owed hr thanked God that “that much was off his mind,” Wilkin Micawber was pictured by -Dickens as the very acme of thriftlessness, but Micawber never showed greater incapacity for business than the past history of this colony presents. But with regard to the question sg to whether we are insolvent or not, there can be no doubt hut that the colony is worth far more than what it is mortgaged for. We have money’s worth, but we hare not the money, and . that is where the trouble comes in. For instance, our railways cost over £12,000,000, and probably they are worth it, hut if the English creditor wanted his “ pound of flesh ” and we had no money, we could not take our railways on our shoulders to London and say, “there is what is equal to £12,000,000 for you;” It is obvious, therefore, that we may have any amount of money’s worth in this colony, and yet be unable to pay our way in London. Wo have so far been borrowing the money in London, and making use of it there to pay our balance of trade interest on previous loans, etc., but that canuot go on for ever. Of all the millions we have borrowed, not a sixpence of it came to New Zealand ; the banks made use of it London, and gave us eredit for it here, paying ns with their own paper. “ It’s the seasonin’ as does it,” said Sam Weller's friend, and so it is the paper that does it so far as the banks are concerned. But when borrowing ceases paper will not do in England j nothing but gold will do then, but where it will be got is a dark inscrutable mystery. It is, however, a mystery that must be solved, and we are afraid the banks themselves will receive the severest shaking,