MONEY REFORM.

Auckland Star, Volume LXVIII, Issue 154, 1 July 1937, Page 8

MONEY REFORM.

PURCHASING POWER.

CONTROL OF CURRENCY.

SECURITY OF INVESTOR-

"The raising of the status of the wageearner, that is to say, the increasing of the purchasing power of those who most need it, is not only essential to the welfare of the masses of the people, but in this welfare is wrapped up the security and prosperity of the employer and investor, as well as the whole capitalistic system. In fact, there can be no real security or sound prosperity without it. There can be no sound employment for capital without souud employment for labour," said Mr. H. J. Kelliher, managing director of Dominion Breweries, Limited, and a director of the Bank of New Zealand, to-day.

Mr. Kelliher was 6peaking at the annual meeting of Dominion Breweries. "Our chairman has already referred to the need for the expansion of the purchasing power of the masses of the people," added Mr. Kelliher. "Both Mr. Savage and Mr. Nash are convinced that expansion of purchasing power is essential to ensure security and prosperity, and, according to a recent cable, the London Chamber of Commerce, the largest and most influential of itis kind in the world, wholeheartedly endorsed this policy. Serious Fluctuations. "Now, how can an adequate expansion of purchasing power be brought about'! It will certainly not be achieved by taking from one section, of the community and giving to the other. In a national sense, it is no use robbing Peter to pay Paul. Such a policy would be the only alternative if we had at all times a fixed and definite amount of money in 'circulation. In actual fact, money is a highly fluctuating quantity, and it will probably surprise you to learn that even to-day the total volume of money j in circulation in New Zealand is several I million pounds less than it was in 1931.

"It is this tremendous fluctuation ii* the volume of money in circulation which is the primary cause of the instability and insecurity of our financial and economic conditions, because the effect of this fluctuation means either contraction or expansion of the purchasing power of the community. - "Now, most of you, no doubt, have had the unfortunate experience of having money invested in securities, and probably gilt-edged securities at that, which have fluctuated widely during the past six years or so. Even the oldest establishments and the strongest financial institutions, with ample capital and substantial reserves, suffered such fluctuations in the market value of their shares, with the result that in many instances shareholders' equities were wholly or partially destroyed. Stability Desired. "Although the investor may receive more or less regular dividends from his investments, the fact that he is constantly faced with the possibility of having the market value of liis shares destroyed or substantially reduced can he—and very often is—fraujrlit with disastrous consequences. What we must aim at is to bring about reasonable stability and avoid these disastrous fluctuations in values, which, after all. are nothing more nor less than a reflection of the fluctuation in the purchasing power of the community as a whole.

"Xow, the very nature of the existing system precludes economic and financial stability and security, and these will never be achieved until the volume of money in circulation i<« controlled by the State or by a State authority. Our money must be put on a sound Imsi*. a just and stable basis, and a ba<=is that is clearly defined and incorporated in the Reserve Bank legislation.

"Now that our own money, as well as sterling in Great Britain, lias been deprived of its former gold backing, it is highly esseritial that the issue of credit and currency should be made the basis of a just and stable unit of value. In other words, our monetary unit should represent something fixed and definite, and there can be no better basis than the produced wealth of the country. The pound note should be a just measure of value that will buy. anear as reasonably possible, the same quantity of commodities in a month, in a year or in 10 years. What i< more, the wealth produced by the people should control money and not. as is the ea«e at present, money control the production of wealth. State Control Needed. "It will be seen, therefore, that in order to bring about security and prosperity and, above all. to ensure the stability of the purchasing power of the people, the quantitv of money in circulation must be controlled and regulated and expanded, when necessary, so as to keep pace with the growth of produced wealth. Such control and regulation can only be fully and effectively exercised bv the State or a State authority.

"Fortunately the people to-day, both men and women, are taking a keen interest in our monetary system, and 1 feel sure the day is not far distant when an enlightened public opinion will demand that money—which is virtually their right to live —be put and maintained on a proper basis.

"When this has been achieved it \\ ill mean the end of this disastrous fluctuation of values which result in widespread ruin to the investing classes and tragic and appalling poverty to the n'nsscs of the people."

Following Mr. KelliherV speech, a shareholder. Mr. R. C. Kenncr. outl.ned a scheme for the •stabilisation of currency values throughout the British Empire. A universal money unit should be fixed, he said, and a guarantee fund established to cover obligations of all participants in the scheme. Later, he suggested, the American dollar might be drawn in.