MONEY DANGERS

Auckland Star, Volume LXXVI, Issue 191, 14 August 1945, Page 4

MONEY DANGERS

Mr. Johnstone sidesteps the substance of my challenge and put up counter proposals more or less foreign to the main issue involved. Mr. Johnstone must be perfectly aware that the statement made by Mr. Kelliher and myself, viz., that the trading banks during the war years created over £20,000,000 of new money, is irrefutable and unchallengeable. Mr. Lefeaux himself confirmed and amplified this statement and made the amount £26,000,000, adding that this creation of credit had contributed to present day inflation. Mr. W. H. Robertshaw, a newcomer to the field, also agrees with these figures but raises another pointless issue. Banking figures vary from day to day, and I am well aware of the fact that trading bank holdings of Government securities declined recently by £7,000,000, just as their advances increased by about £5,000,000. No one can deny, however, that creation of money which is not balanced by production is inflationary in its effect, whether the' amount is 20 millions or 26 millions. I am quite prepared to substantiate my contention that the original creation of this credit money was to all intents and purposes costless to the trading banks and, further, that "the proposals made by Mr. Kelliher and myself for the reform of the system are sound, practical and in the best interest of the people as a Whole, and should be given effect to." Evidently Mr. Johnstone takes a very pessimistic view of the outcome of the suggested debate. I did not ask him to subscribe £25 to any fund, but proposed that the loser should donate this amount to an approved charity. I am still hoping that Mr. Lucas will accept my challenge. WALTER S. OTTO.

I have been following with interest this discussion and would like to point out that the State's control of the trading banks is far greater than imagined. Do people- realise thai the Government has directed some trading banks to cancel the unused portion of the overdrafts of certain groups of businessmen, who because of restrictions have not been able to make full use of their authorised, overdrafts? The Government has directed the trading banks to extend this credit so cancelled to another section of the community. This is what Mr. Nash meant when he said, "If the Government desires the trading banks to make advances for certain purposes in the public interest it has power to do so." It looks as if Mr. Lucas has proved his case beyond all doubt and that Mr. Otto is like Rip Van Winkle awaking from a lengthy dream bereft of all understanding of the functioning of the now existing monetary system. G.M.D.