DOUGLAS CREDIT IN ACTION

Press, Volume LXXII, Issue 21775, 6 May 1936, Page 8

DOUGLAS CREDIT IN ACTION

to thi iditob or ins fkesb. Sir,—lf "New Truths for Old Fallacies" will trouble himself to read my letter again he will find that, whilst I stated that a bank note does twenty "tours of duty" during a year, I also said that during this period it liquidated the production costs of articles having a total value of £2O. I should have thought that anyone capable of doing a little simple mental arithmetic would have realised that I was fully aware that £1 can only liquidate production costs value £1 during one tour, even though it passed through 100 hands and financed the purchasing of 100 £1 articles. "New Truth for Old Fallacies" fills two and a half inches cf space laboriously and in great detail tracing the passage of a note, during its absence from a bank, through four hands, and then triumphantly announces that it has only liquidated the cost of goods and services to the value of £l. This is exactly what I said in the letter which he so Datronisingly criticises. And I will reiterate for his special benefit that in this country a note makes 20 of these cycles or tours each year and therefore liquidates total costs value £2O. Apparently he does not know that because a note may pass through many hands during a "tour," as compared with a cheque, which seldom finances more than one;deal, that it has a far greater power to start a rise in prices, wh'ich is inflation, than a cheque has. I have Cole's and Hattersley's authority for saying that if for any reason our notes doubled their speed of passing from hand to hand, then prices would rise. In fact Cole states that the great German inflation was largely caused by a great increase in the velocity of circulation. And Cole is not referring to cheques, but to notes, for he refers to "the same money being used again and again." I therefore, definitely assert that the issuing of £10,000,000 of brand new notes would have a far great inflationary inclination than the same money issued in cheque form. I did not say that cheque money could not cause inflation for I know that unless the goods are there in sufficient quantity inflation is inevitable. What "New Truths for Old Fal'acie'-" apoarently does not know is that the issuing of £10,000,000 brand new notes against new production value £10.000,000, could very easily result in inflation. I invite him to read Cole's "World Chaos," page 234 and Hattersley's "This Age of Plenty," page 51.—Yours, etc., „ A F. G. THOMAS. May 4, 1936.