CURRENCY DANGERS.

Auckland Star, Volume LXI, Issue 262, 5 November 1930, Page 4

CURRENCY DANGERS.

MR. THEODORE'S PROPOSALS. : ..-■ PROCESS OF INFLATION. "Afternoon tea in Christchurch would cost us one million million.pounds if New Zealand currency had been inflated to the. same extent as wae Germany s, from 1914 till 1923 " declared a leading New Zealand. economist to a Cnristchurch "Times re--porter, in giving an illustration of the effect of inflation as proposed by Mr. h. G. Theodore,- formerly Australian Federal Treasurer. . '' , . "It is a fearful mess when one starts to inflate currency," stated the economist.. "Mr. Theodore eays that the banks m Australia are trying to deflate, andi he wants inflation as an apparently easy way out of the difficulty. I suppose he intends to borrow from' the banks, and he actually does suggest stabilising the Australian pound level below par. His suggestion of 20 per cent inflation, if put into effect, would mean that £100 of Australian money would be worth only £80 or English money. \ . - = "If this were donee Australia would be able serhaps to maintain the present level of wages and prices and might be able to avoid a certain amount of depression. Inflation has already been proposed by fairly responsible people. Australia has been drifting down the hill for a considerable time, and deflation would bring her up with a round turn. If that country is going back to a level of values on a par with those of England, prices and wages will have to drop accordingly. One way out of it is to avoid necessary deflation by setting a new rate." What of New Zealand? ) The speaker stated that if further inflation were carried out in Australia it would be vitally necessary for New Zealand currency to be separated from that or the Commonwealth. He thought that the banks would immediately separate the two. The Australian pound was already depressed by about 10 per cent. / inflation was the easiest thing m the world. It occurred in Germany and France after the war." It would do Australia's credit no good overseas. It would mean that for payment of every. £100 ot debt in London Australia would have to find £120. In the speaker's opinion it would be better for Australia to try /to get down to •" parity with the English pound. That was what Sir Otto Niemeyer expected, and was certainly what was expected by the resolutions passed at the Premiers' Conference on August 22. Inflation would cause everything .to rise in price. By 1923 prices had so risen in Germany that had the same increase occurred in New Zealand it would cost about one million million pounds to buy r afternoon tea. Twenty German marks before the . war. were equal to twenty million million marks in 1923. In France tne franc was worth alrout one-fifth of its pre-war value.' The stupendous inflation in those countries illustrated the extent to which it could be taken. Once the process of inflation set in it. was very difficult to arrest. ■