WAR DEBTS AND BUTTER.

Waikato Times, Volume 108, Issue 18159, 25 October 1930, Page 9

WAR DEBTS AND BUTTER.

(To the Editor.) Sir,—The most cheering news of recent dates is the cabled report of America’s hint of a moratorium oh war-debt payments. There is a certain poetic justice in the prospect of the United States of America being forced to cancel for her own protection the war debts which she, as the world’s creditor nation, extorted from an impoverished Europe 10 years ago. The British war debt to the United States of America was funded at £1,100,000,000, with payments spread over 60 years. The United States drove a hard bargain with the idea of securing an enduring trade with Europe. The British financier and banker, however, realising that a flood of American imports would paralyse English industry and ruin her home market, has consistently shipped gold to the United States of America to cover war-debt instalments, instead of balancing accounts with commodities. Tills of course has been done without publicity, for obvious reasons, especially having regard to the risk involved in the transport of gold; and so America has only now made known the chief factor in the steady decline of the prices of commodities in Europe. With large quantities of the money supply each year going out of England (Europe’s banker) there is less money left to go round, and correspondingly each money unit will buy more commodities. Conversely, the money value of each unit of commodities must fall. If, however, the United States of America, with the bulk of the world’s gold supply idle, with a greater percentage of unemployment than any other country, and that in spite of the world’s highest protective tariff, decides that she must call a halt-; with war payments and accept the polite suggestion made by . Earl Balfour in 1920, then the. movement of gold across the Atlantic would be checked, and British commodity prices should have a chance to stabilise without further downward drift. It would be the wildest optimism to expect anything of a rapid or appreciable recovery for a considerable time, hut it would not be surprising if students of the situation soon began to predict that the bottom had been reached. The position in regard to dairy produce prices is rendered very complex by reason of accumulations of unsold stocks, and these must be cleared before there can be any enterprise displayed in the markets. The cry of over-production of butter is frequently raised, but it would be quite incorrect to say that the limit of consumptive demand for butter is in it. The trouble about butter is that it has what the economists call an elastic demand. If the buying power of the consumer falls lie is tempted to accept cheaper substitutes in the form of margarine, much of which is decidedly attractive and palatable. It is beyond question that the lessened money supply of Great Britain has: enormously increased Lhe demand for margarine at the expense of butter, and if we are within sight of stability in buying power there is hope that the greater food value of butter will bring greater consumption as British industry and wages become more secure. Following the discussions of the Imperial Conference Mr Forbes, realising the dead weight of opposition to protective tariffs on foodstuffs favouring the Dominions, might well advocate as an alternative that Great Britain should seriously curtail,' if

unable to eliminate entirely, the manufacture of marganne. resnect Canada has set an exc example, by prohibiting absolutely the manufacture of any form of garine for human consumption. Lust be admitted; or suoli a Bleu eould not I undertaken, us it would possibly mean the ruin of the entire copra trade, of the Pacific. The outposts of Lmpire deserve consideration, but if wheat quotas are the order ot the dab surely margarine quotas would e jilt as logical, and should work no more hardship on the cocoanut planter than on I lie whcatgrowei. Both must look to the outlet lor the produce before they risk their capital dn The b murkcL for butler is showing very little change, although there is an undercurrent of hope for a check on the present decline in prices. There is some rather ill-advised publicity being given in Australia to the increasing production ol_ danv P lO duce in Australia and New Zealand, with the object of increasing marketing combinations to bull the hn o lh,h consumer into paying a little more lor his butter and cheese. One cannot help a feeling that too close an association with Australia just now Uj dairy politics may not be as taetiui as could be wished. The kangaroo has been thumping bis tail and talking about debt repudiation, blaming everyone but himself* for his financial improvidence, and if we value British goodwill as an aid to the best commercial treatment a close association with Australia could with a certain amount of fairness he regarded as

“evil communications corrupting good manners.” Forward buyers of butter seem little inclined to risk anything more than lid f.o.b. for butter to arrive in January/February, and losses have been so prolonged and heavy that it seems unlikely' that any great amount .of forward buying will take place, at any rale until present accumulations are cleared.—We are, etc., LEONARD AND SON, LTD. Auckland, October 23, 1930.