THE MONEY TREE.

Auckland Star, Volume LXX, Issue 34, 10 February 1939, Page 6

THE MONEY TREE.

It has been suggested in some quarters. ~-■• , that the moiietisation of frozen assets, or • "equating money to production," as it is'sometimes called, should not be left to the tender mercies of private lending institutions and that it should-become a State function. Tho ■ ' proposal is open to several serious objections. " In the first place, who is to d' scr itninate Between individuals and firms engaged , same line of industry? The State is supposed to act impartially, and if it had to finance or v ; :i monetise all and sundry it is easy to see that tho risk, and often the loss,- would fall upon.- ' . the community for the benefit of the fewi'This'" I ' ; 'j' ; is because there is <& point of-saturation '.or s '-' -■ rejection in riiany'linos of industry, and that'.'"-' when these points "arc reached continued opefa> '■-■] iion involves loss.' Against this view of private '■•'"-;' fiiia.ncing.it is held that if money were' freely ' ■'''■' available, these points of saturation would not be reached. In answer to that it can safely ... - be said that, with modern equipment these ■•- points could only thus bo shifted back in some : ~ degree to a different date, and then the trouble j is met again. Tho proposal does not recognise the fact that human wants tend.to variety,' and this variety jii demand is frequently the '. >' underlying cause of loss, or over-production}-, ."-' as wo say. This danger of non-use is now ""■' taken by individuals and firms, who, in order . : '" to .expand business and employ mOro hands , ' and machinery, seek tho assistance of' other ' v men who jnake a. business of monetising goods, which may be on their way to consumers, ': including those who benefit by the expansion. It 6ecnis inevitable that "log-rolling" would occur if the State had a monopoly of lending and was tho sole arbiter of expansion, for while human nature is what it is, a Statu monopoly lends itself to abuse and retro-"'" ' gression, with party agitation thrown in. Again, we also have the one-sided argument ' .. —about waste under present conditions'— ■' advanced. The risk of waste will not be diminished under State ownership, and it may be increased. An argument raised against bankers and others is that they do not lend ■■:': their own money, and charge interest upon money they never had. In my opinion, they do accept risks, although they arc careful to. minimise them as much as possible. An insurance company charges a premium for covering risks. . It does not expect to meet losses out of original capital, but out of accumulating premiums, and so a banker can . usually meet advances out of' interest'-' charges and deposits. When a bank agrees to •< :■[ an advance it puts its funds behind tho nc\v .;-..,' cheque money drawn by its clients, thus .. . monetising some security that has been frozeti; , :,■'., If the State is to be sa'fcgnarded'against loss, the necessary corollary is tho ascertaining and ; fixing of quotas, and that involves bringing the individual producer under the rule of • officialdom. E.NJ).. '. ■.-