MAKING MONEY

Press, Volume LXXI, Issue 21577, 13 September 1935, Page 22

MAKING MONEY

SO THE BDITOH 07 TKB 9SBBS.

Sir,—"Kaye Hoe" in "The Press" of September 9 claims that bankers knew "that if these (pre-slump) conditions were allowed to continue, their loans would be paid back and they would become just deposit holders and bookkeepers." ~, . He thereupon makes the following assertions:—(l) "Thereupon they intrigued the removal of fixed prices and fixed interest, and thus (2) made it legal for them (the bankers) to initiate the policy of deflation. (3) This policy left primary and secondary industries with their standing debts stable and at the same time reduced their returns by 30 per cent, to 60 per cent. (4) This forced primary producers and business men further into debt and so, (5) the banks acquired ownership of property as their victims had to relinquish it. . I would like to address the following questions arising out of these assertions:—* (1) What fixed prices and fixed interest are referred to. and at what date were they removed? (2) At what date was a policy of deflation initiated; that is, at what date was bank credit restricted with a view to bringing down prices? (3) How does "Kaye Hoe" arrive at his reduction of returns "by 30 to 60 per cent"? (4) At what point after the depression broke, say 1929, were "producers and business men forced further into debt"?

(5) With what evidence is the claim that "the banks acquired ownership of property as their victims had to relinquish it" supported.—Yours, etc., FINANCE. Wellington, September 11, 1935.

TO THE BDITOB OV TEE PBZSS. Sir,—Your correspondent, Mr Bickerton, recalls the failure of Germany's paper currency. If Germany had done as Russia has and made her internal currency illegal tender outside of Germany, and in addition had fixed the value of the mark as well as commodity prices by legislation, there might have been another tale told. Germany also had enemies for neighbours. World financiers outside of Germany were hostile to the policy and she was set upon as by a pack of wolves.

"Bradburys" were not recalled for a good while after the war. It was state credit that financed the war, not the Bank of England. The British Government even mortgaged the Great Western Railway to Pierpont Morgan. America was the leading country of the world and New York was the financial centre at the end of the Great War. Also I have definite knowledge that Great Britain flourished for three years after the war. The first sign of the slump did not hit producers until the end of 1921. This would not have happened then if the control of prices, etc., had been maintained. If financiers had kept money value stable instead of sending the world down headlong by initiating tlie policy of deflation, the world could have turned its mind to the reduction of working hours and other improvements in the standard of living«"and thus remedied the flooding and breaking of world markets. But the financiers of the world were not. directed from an agreed central authority. Some say there were five different financial groups. For the purpose of discussion we can take the three best known—sterling, dollar, and franc. We know that these groups have been at war with one another, that France wanted Paris to be the financial centre of the world, and that London wrested the financial supremacy back from New York. We also know that it was the Bank of England that initiated the policy of deflation and brought down America and France. One cannot blame the Bank of England when dispassionately considering such strong competitive circumstances. It was thought at the time that deflation would make the payment of the war debt to America easier, but the Americans, in demanding payment in gold, thwarted that. The policy of the financial groups at that time was to beggar my neighbour and the devil take the hindmost The purpose of the World Economic Conference was really to set up a central financial authority, holding the confidence of all nations, to direct international finance and economics. This conference failed because no nation had worked out a •satisfactory national finance and economic scheme. President Roosevelt realised this and realised thai it would be necessary, lor

him to solve America's internal finance and economic problems before he could meet and join other nations in evolving an international scheme. Great Britain has settled down to solve her internal problem. She has even adopted the policy of inflation and a policy of expanding her trade in her home market. These are the very policies that "sound" finance advocates oppose and try to discredit in New Zealand. As a solution of national and international financial problems, when considered from an impartial world point of view, deflation was worse than of no use. Although it strengthened the banks and money lenders it distressed the different communities. This added distress was caused by the writing down of assets and as a sequence, progressively added to the burden of liabilities.

The policy of the present government in New Zealand was deflation—to cut down prices, wages, and salaries to reduce costs, When it came to the reduction of liabilities such as interest, mortgages and debts, which was the logical thing to do, either the Government's nerve failed or it was thwarted. For wages, salaries, education, etc., the Government adopted immediate action and slashed them down. But such sacred things as mortgages and debts must still be worked out over a period of five years. This means that if the present Government is returned we shall experience five more years of depression.—yours, etc., KAYE HOE. September 12, 1935.

to the isnoß or tk> rases. Sir,—ln "The Press" of September 12, Mr F. G. Thomas states that the £300,000,000 in "Bradburys" were issued free of cost. This Ido not think is true. The fact that some "Bradburys" were in circulation for longer or shorter periods is immaterial; ulti-. mately they were all redeemed. As for the German national debt, it stands to reason that a poor nation cannot borrow as much as a rich one. Had they won the war the Germans would have had the assets on which to borrow £lB3 a head, and our "Bradburys" would have become the worthless paper, and not the German war marks. The only banking policy I know of is that of the present banks, and this Mr Thomas, admits must be done away with. Take its policy away from a bank, and there are only clerks and buildings left. I do not agree that modern banks create money, apart torn notes representing assets. If they did. it would be illegal, and they would be had up for forgery. Should the Douglas Credit people wish to create a bank on the lines laid down by Major Douglas, they can. Then, if it has a better policy than that of the present banks, it will defeat these because of its superiority. A quicker way to reduce all costs by 25 per cent, would be to do away with the present "exchange" and reduce all wages, salaries, and prices to a parity with those of Britain. Repay Britain all borrowed money, and with the interest saved, pay her an insurance fund to be used in our defence in the event of war, or to prevent war. At present, because Of a reckless party government system, we are living in a "fools' paradise" and behaving like a set of children who are provided with toys, bought with borrowed money by their nursery governess to keep them good. —Yours, etc.,

A. A. BICKERTON. September 12, 1935.