POINTS OF VIEW

Waipa Post, Volume 49, Issue 3504, 11 August 1934, Page 7

POINTS OF VIEW

LETTERS FROM READERS. WORLD PRICE LEVEL. ,Sh\ —Wlheat-growers have scarcely got over the strange inconsistencies of the Tariff Commission's recommendations. In one breath the members say that they are " unable to see any reason why the wheat-fanner shouild not, like most other primary producers, be subject to the vicissitudes of the world price level." In the next breath they recomlmend a duty on mpize products (wh'ch nobody cbjeqts to); but there were only 8600 acres of maize grown in 1933 and 302,000 acres of wheat; and then they recommend sheltering a whole heap of secondai-y industries —and wheat-growers are not strenuously objecting to the payment in cases of a 25 per cent' duty on the implements they require. But why should the wheat-growers alone be governed and controlled by the world price level ? I ihave just perused a most interesting document showing the extent to which European countries are asT sisting their wheat-growers to' stand

up again against " the vicissitudes of tfhe world price level." These duties are now operating, and might be commended to Messrs Harris and Wright:— Albania, 9s lid a bushel and £24 15s 3d a ton on flour. Austria, 5s lOhd a bushel and £23 9s Id. Bulgaria, 2s 7d a bushel and £8 4s 4d. Czechoslovakia, 2s lid a bushel and £ll 13s 4d. Denmark, 9£d a bushel and £2 2s lOd. Esthonia, 3s 3id a bushel and £l4 8s Id. Finland, 3s a bushel and £7 17s 2d to £l3 2s 6d. France, 5s Bid a bushel and £ls 3s 7d. Germany, 10s 4d a bushel and £29 15s 3d. <}reece, Is 73d a bushel and £6 9s 2d. Holland, Is a bushel' and £8 4s lid. Hungary, 2s .32d» a. bu'shel and £8 0s id. Yugoslavia, 2s Sid a bushel and £7 4s. . .. Latvia, 2s sid a bushel and £l4 lis Bd. Italy, 6s Hid a bushel and £l7 14s 9d. Lithuania, 5s 43d a bushel and £26 19s 10d. Poland, 6s lid a bushel and £ls Is 2d. •Rumania,. 4s, 3§d a bushel and £lO 15s 6d. , ■ Sweden, Is Old a bushel and £3 0s 9d. Turkey, 4s 9d a bushel and £ll 15s 9d. The United Kingdom and Australia are not included in the above list, but the system of deficiency payments in the United Kingdom provides for the wheat-grower receiving 5s 7id a bushel, and Austoalia in 1933 paid a straight-out subsidy of three and a half millions. The latest information from the United 'States of America states that the Administration expects to pay wiheat producers 100,000,000 dollars 'in bonuses for the curtailment of production.—l am, etc. J. L. PEPPER.

Christchurch

THE CREATION OF CREDIT

appears to me that all readers of the Press who have an opinion about the creation of credit can be divided into two main groups; the first, which is a sort of reaction 1 - ary group, holding the opinion that the only source of credit creation is the banks; the second, or conservative group, holding the opinion that the only source of credit creation is the banks; the second, o'r conservative group, holding the opinion that credit is either not created at all, or, if created, it done so by any bank, stock and station agent, business man, or corporation aggregate, capable of issuing a loan. Now, for my own information, I would like to have this important point cleared up. It seems to me that the point is quite capable of' being transferred from a matter of opinion to a matter of fact. Either the banks are in fact the only source of credit creation or they are not. Further, it seems to me, the persons best qualified to answer the question, " Are the banks, in fact, the one and only source of credit creation ? " —are the banks themselves. May I request in my ingenuous way that you submit the above question to the local manager of the Bank of New Zealand, and print his reply? Of course, for reasons one can imagine, even if the answer is in the affirmative, he may wish to deny it. How, then, may I find the truth Oif th'is matter? Are our leaders in economic thought, the professors of economics at our universities, sufficient)l;/ unbiased to answer the question truthfully? The representatives of group one a'bove state, inter alia, that the creation of an overdraft by a banker creates credit, and is not a loan of the bank's liabilities (viz, customers' deposits). Now, as my pen-name signifies, I am no economist, and 1 am also no banker, but I may say that until reading the recent correspondence in The Press I had always imagined that trading banks traded by lending their deposits out at a higher rate of interest than they gave their depositors. This idea of ntine is appai'ently quite wrong, and the banks accept millions of pounds of customers' deposits, pay said customers 3 per cent for such acceptance, and put the deposits awsjy in a pigeon-hole out of the way of temptation to lend them out at 6 per cent. The accepting of deposits by a bank is apparently a- gratuitous, act on their part, and is only a smoke screen to, cover-their true nefarious trade, which is to create credits by arranging 'overdrafts on certain securi-ties,-and-:theh sit back and the principal will'never be repaid,, so-'that they miay, (a) collect the collateral, and (b).keep on collecting.the 6 per cent. Take this, example: A Jmari whom we shall call A arranges with his banker B for an overdraft of £IOOO. The matter is arranged, and A, leaves the manager's office and enters the body of the bank, where he

writes a cheque payable to self and hands it to the ledger clerk, gets it " O.K.'ed" on the strength of hia little arrangement with B, takes it tc the paying teller, and gets handed £IOOO in notes. The cheque is now cancelled, no money has been created (possiblv credit has though), and the bank has lent to A £IOOO of its funds. Now I maintain that this trading bank has lent £IOOO of its customers' deposits at a rate of interest higher than it grants to its depositors. If I am wrong will somebody please shew me my error. I admit that it is quite likely that I am wrong, because I am absolutely.—'Yours, etc., NO ECONOMIST.

MORTGAGORS' RELIEF LEGISLATION. : (Sir, —»At one time thil.ft w r as a vir- . tue; nowadays it is almost a crime. The present Parliament is definitely hostile to it. The mortgagors' relief legislation, shows that.; TThe interest rl payable to the mortgagee has; been reduced by Statute by 20 per cent. Comjmissions have been set up. These commissions have power to recommend that arrears of interest be wiped, out; that interest be reduced below the statutory? rate, or even reduced to nil. . The Government has refused representation to the lenders on these commissions. The commission makes its inquiry behind closed doors. When the matter comes before the Supreme Court for the final decision the proceedings aga!'n take place behind closed doors, or, to use a legal phi'ase, "in charra- ' bers." One commission threatened to "go on.strike" because the Supreme Court refused to ratify its reco'm-" m'endations. Did the Government retire that commission ? It did not. That commission still sits. What is one to think cf it ail ? ' .

Farmers, consisting of (1) inefficient farmers and (2) farmers who, \ not satisfied with their existing properties, speculated in other proper- ; ties during the good times, have been | relieved' in respect of their liabil ties i at the expense of the savings of the I thrifty people. In other words, the ; property of the thrifty has been conj fiscated in favour, of the inefficient land of : the speculator. 1 What hurts more than anything lels'e is that the unfortunate lenders I have to seriously economise, while I the borrowers, in many cases, do not • deny themselves anything! Th§y con- ! tinue to live in the extravagant style |of the prosperous times, when prices lof produce Were high. They can. shut | the : r gates against their creditors arid !"live on the fat of the .land." j' What 'about the moral aspect of ;it ?, Has the-Government legislation i absolved those borrowers from ' the j solemn obligations they entered into 'when they borrowed the money ? Will not a stigma remain, and rightly remain, for all time on those farmers who have taken advantage of this leg'slation ? Will not the same stigma rest on the Farmers' Union, which, in session and out of session, has brought pressure to bear on the Government to pass repudiatory legislation in favour of the farmers ?

A , professor recently stated that, : though people were horrified when 'this, .legislation was.passed, they now 'looked on' it with complaisance. If th.!s statement be correct it indicates a weakening of the moral fibre of the ■ people of New Zealand. What is the outlook of those unfortunate people .who put their savings in mortgages iat a time when a " first mortgage " 'was considered the finest security in ithe country .? There is no doubt that ■the mortgagees get little consideration from the adjustment conimiissions, for the reason pointed out by one chairman that the commission is ,a mortgagors' relief commission. Can iwe wonder that money is locked up (while legislation of this kind remains lon the Statute Book'? . What is the : use of newspapers and people urging ithe loosening of capital while shutting their eyes to the fact that confidence has been destroyed by reason tof the Government's "destroying the sanctitv of contracts ?—I am, etc., ! X.Y.Z.