THE WAY OUT.

Auckland Star, Volume LXIV, Issue 85, 11 April 1933, Page 4

THE WAY OUT.

CURE FOR WORLD DEPRESSION.

ONLY THE OLD HARD ROAD.

ANSWER TO INFLATIONISTS,

The present time of economic stress has brought severe condemnation of to world's monetary systems from those who consider that radical alterations in currency methods are essential to world recovery. The March issue of the National City Bank of New York's monthly circular defends the present system as follows:

"It is a common statement in this country, made most frequently by those who are proposing debasement of the currency as a way out of the depression, that the leaders of business . have no programme and are offering no leadership to promote recovery. If this charge means that the business leaders know of no way to end the depression in a manner to relieve people from the necessity of making readjustments, and legislators from political action they are loath to take, it is a correct one. But if it means that tney are unaware of the nature of the obstacles to recovery and unwilling to state and support their views, it is incorrect, ana the charge can only promote misunderstanding and harmful antagonism. "Within the past month a committee of the Senate has solicited the views ot a large number who may be described as business leaders, though they would be at a loss if asked what leadership, other than that of influence, they can exert outside of their own business; and there has been no lack of definiteness or agreement in their opinions. Nearly all have stressed the necessity of overcoming the alarm, and reviving the will to spend and invest, bv dealing with the causes of the current fear and distrust. They have agreed .-hat to balance the Budget and place the Federal credit above all doubt, to repudiate the inflationary proposals, and to deal with the intergovernmental debts in a manner to assist in currency stabilisation and the return to a common stardard ot value, are the measures that are essential above others to promote recovery.

Confidence, Not Money, Needed. "The inflationists probably do not consider the foregoing a programme, since it is simple in conception, lacks all aspect of the miraculous, and is politically dinicult to achieve. But the lessons of other depressions and the experience in this one during 1932 alike indicate that there is no other way out. There is no lack of money in the country, or of banking reserves to support credit expansion, but neither money nor credit is circulating normally and nothing will make it circulate except confidence that will revive investment, and the restoration of balanced economic relationships that will revive trade. As long as it is not known how much more money the Federal Government will need, or when and on what terms the inevitable funding of the shortterm Government debt into obligations will begin, or to what extremes Federal appropriations will be carried, and as long as proposals to alter the monetary standard are agitated, the revival of confidence that will set credit t<o circulating again is likely to be deferred.

Government Economy. "One of the arguments given for inflation is that 'everything else has been tried and nothing but expansion of the currency remains.' But it is evident that this is a misstatement. The application of the •most rigid economy in governmental expenditures, phis a balanced Budget, has not been tried, though when there was hope of it a year ago business recovered vigorously. The settlement of international differences, lowering of trade barriers, and adjustment of intergovernmental payments to relieve the exchanges from strain during this abnormal period, have not been tried, though when the Lausanne Conference last July gave hope of 6uch an outcome business revival occurred in every country. Against this experience may be considered the effects of the inflationary proposals, agitated both one year ago and at the present time, which have contributed nothing but instability and have had no effect but to drive capital into idleness as long as the alarm lasts.

Looking to Roosevelt. "Beyond all doubt the way out of the conditions of to-day, which repeat the conditions of a year ago, is the way that brought the improvement a -year ago, by taking action upon the situations which hold the keys to confidence and carrying forward the programme of adjustment ana orderly co-operation where difficulties have arisen. It is an obvious mistake to characterise this programme as 'die-hard' or deflationary, though that is an error made in some quarters. On the contrary, it is a programme which promises improvement in prices, and quickly. Every business man of experience will agree that nothing would stimulate the markets more immediately and lastingly than a programme of genuine governmental economy, balanced Budgets, and debt adjustment, and the country looks hopefully to the new Administration for action along these lines."