HIGHER TAXATION

Press, Volume LXXII, Issue 21908, 8 October 1936, Page 16

HIGHER TAXATION

TO THE EDITOR OF THE PRESS Sir—l wonder if Mr Bray noticed in Dr. Frankel’s article on Soviet Russia a reference to the monetary system in use in that country. According lo Dr. Frankel, two currencies are in use side by side; certain transactions are effected by means of the gold rouble note, while the Government nays its employees in a note issue of its own, which, of course, is only valid for internal purposes. The gold rouble, on the other hand, is accepted by outside countries. If, as Mr Bray seems to hold, money issued by a sovereign State is quite as good as any other, why should two kinds of money be in use in Russia? The reason is plain enough, in my own mind: money of the kind that the Russian worker is paid with is merely a demand for goods or services, but cannot enforce this demand on any other national. The Russian worker ran spend his money on a holiday on the shores of the Black Sea, but he cannot take a trip to Berliri or London. Mr Bray has given in a previous letter the example- of money value? varying in accordance with the scarcity or otherwise of goods, as, for example, the price of water in a desert as compared with its price in Canterbury plains. Let us suppose the owner of a barrel of water in the desert asks £lO for it, and is offered that sum in New Zealand currency, it is possible that he might say, “£lO sterling is my price; if New Zealand currency is offered I shall want £l2 10s.’’ So that money values are not wholly determined by goods, but determined to a large extent by their relation to gold. Hence the attempt by the principal financial countries of the world at the present time to arrive at a common basis of monetary value. All this may be very foolish and unscientific, but it is even more foolish to deny the facts of the case. Nor is it easy lo see how Ihe difficulties of issuing purchasing power can be overcome, excepting in some such way as the Russian Government has devised. Any money issued by a bank is merely a debt, not an addition to purchasing power. That debt may be repaid, as in the case of South Africa by the production of gold, but, in any case, it is regarded as being repayable at some future date. If no such possibility or rather belief in such possibility existed, the banks could no longer issue money. The only change that stabilisation of currencies can effect is in the proportion of gold required to back other issues.—Yours, etc., ANALYST. October 7, 1936.