THE RATE OF INTEREST.

Auckland Star, Volume XLIV, Issue 77, 1 April 1913, Page 9

THE RATE OF INTEREST.

(To the Editor.) Sir, —Not so very long ago, about six months -as a matter, of fact, the New Zealand Commission on the Cost of Living ascribed cheap money as one of the causes of high prices. Since the Conimi—on's report appeared tho price of money, i.e., the interest that has to be paid for- the loan of it, has risen, on good security, from 5 per cent to 7 per cent, yet prices, far from falling, have goue up; therefore the Coir mission must acknowledge that their conclusions in this particular instance are at fault. Apart from local causes for money stringency, which axe only too apparently due to the frolicsome finance of the past decade, the chief reason for this world-wide present constriction is not due to -any falling-off in the world's output of the precious metal, which, indeed, for the year 101"-2 was over twenty-live millions of fine ounces, as against four millions of line ounces for the year 1881. Neither can it be. traced to the free circulation of coin necessitated by the building of battleships by the great self-contained nations; rather it is caused by the endeavour to hoard up a great gold reserve which shall, against j the day of Armageddon, be found stored in the military war chests of the Powers of Central Europe. The vaults of the Bank of England and of the National Bank of France are sealed against an abnormal ebb of gold in exchange for a How of paper by the simple process of raising the bank rate. ! And when, in the creditors' interest, « | resort, to this device is taken, the debtor ' section, big and little, must needs feel the pinch. To talk or write about money being tight because of its absorption into the melting pot of military and naval armaments is nonsense. Millions are spent on 'he upkeep, but these circulate, and, like the brook, might flow on for ever unless arrested by the machinations of the money-lender, aided unconsciously by the hoarding instincts of Hindoos

and Egyptians, and the military chest necessities of the Triple Alliance. The. effect of the successive expansion and contraction of the circulating medium of society was well shown in the rise and fall of the Roman Empire, ■„icb was brought about by a plethora of the precious metals, followed by a decline in the gold and silver mines of Spain and Greece. The discovery of America and the flooding of Europe with the precious metals from Mexico and Peru led to the resurrection of mankind from the ruin which a directly opposite set of agencies had produced. Again, if the circulating medium of the globe had remained stationary, or declining as it was from 1815 to 1849, from the effect of South American revolution and English legislation, it would have become inadequate to the wants of man, and the fate which crushed Rome would have been repeated. California and Australia came to the rescue, and did in the fifties what Mexico and Peru had done three centuries previously, the opening up of their treasure chambers saved the industrial world from debt and oppression. With an annual gold output fourteen times as great as it was in 1850 (Califorma), is the industrial progress of the i world • going to ibe again ar- • rested? Not by the exhaustion of supply, as in the days of the Roman Em- , pire; not by Sonth American revolution or Tory legislation, as in the eighteenth century; not by suspension of free coinage of silver, which currency legislation, by the way, was to confront and offset that great rise in prices which culminated in IS7O, the year of the white metal's demonetisation: but by the machinations of money lenders, aided by the o-old-hoarding instincts of semi-civilised race 3, and the specie accumulating necessities of prospective world-conquerors — j I am, etc., \ Devonport.