MR SAVAGE ON MONEY

Press, Volume LXXV, Issue 22659, 14 March 1939, Page 7

MR SAVAGE ON MONEY

TO THE EDITOR Or THE PRESS Sir, —In reply to Mr J. Hill and an anonymous scribe Mr Hill seems to have an idea that gold should be used as currency and complains that when he takes gold to a bank he receives only notes in exchange and that the bank will not take notes in exchange for gold coins. Why? Because gold coins are not an authorised currency. He could, if he so desired, receive other currency, say silver coins, and why does that not satisfy Mr Hill? I sincerely hope that Mr Savage will overcome his difficulty. The position of being short of money is very embarrassing. But when he is told by the Reserve Bank directors, to take things steadily and face the situation and live within his income, it is sound advice and the Prime Minister of New Zealand should be big enough and strong enough to face the situation and not, like a big child, cry and say “I’m not going to admit that I’m wrong, I’m not going to apologise because it is my belief that the same disaster, which was Germany’s fate, would not obtain in New Zealand by the increase of Its fiduciary note issue.” It seems to me that Mr Savage knows that it is necessary to curtail his spendthrift methods, as recently he has expressed the wish that with the assistance of the present restrictions of imports, etc., secondary industry should be enabled to absorb some 8000 or so of the present public works employees. It is apparently the hope of Mr Savage that the recently imposed import restrictions will increase the trade' in locally-manufactured goods, also augment overseas credits, which have recently been depleted, and thereby make further funds available tor overseas commitments. Such action does not necessarily mean that there will be more money available locally. Such restrictions may result in a lesser quantity of New Zealand goods being purchased and by reducing and disorganising overseas trade, cause a reduced purchasing capacity and thereby defeat the real object in making the restrictions. Mr Savage might have done good service during his term of office had he adopted a plan of subsidising primary industry employment, and even now he would do good service by transferring public works employees to subsidised farm work. By adopting some policy to increase primary production I am convinced that success would be achieved. There would be no need for the limitation of exports and imports; there would be no shortage of money. The primary producers are the backbone of the Dominions, and Mr Savage will find that his experiment in attempting to foster his secondary industry nursling at the expense of primary production is going to be a very expensive experiment and likely to give Mr Savage much money shortage and many headaches. And that is the situation as I see it; I have no objection to anyone holding different views. It is not a question of Labour v. Nationalist; party politics should not come into the question. The electors decided, at the last election, to let the Labour Government continue in office and both sides should now drop any party strife and let Mr Hamilton and Mr Savage shake hands, at least until the next election, and get down to business and face the situation, forgetting all differences and putting New Zealand first now and for all time.— Yours, etc., R. T. WILLAN. Rangiora, March 10, 1939.

TO THE K2>ITOB Or THE PRESS Sir, —It is sometimes assumed that the monetary schemes which are so much in evidence to-day are of recent origin—the outcome of economic stress. ThiS, however, is not the case with many of them. In a text book on "Money,” published nearly 70 years ago, Professor Jeavons reviews a number of such schemes. Some of them he dismisses as entirely fallacious, but among those which he tabulates as worthy of some consideration are several which have been lately advocated by correspondents in your columns. Jeavons was an able and dispassionate writer, in which respect he had an advantage over some of your correspondents. There seems to be an inclination today to make battle cries over matters which require a calmer attitude of mind if they are to be adequately dealt with. There was certainly in the last century a great controversy over the question of bi-metallism, but, in the main, money problems were not so hotly nor so widely debated. These problems have assumed a greater importance to-day, and there is a widespread belief that their solution is of vital importance. In estimating the progress or want of progress which has been made towards this, it may be well to bear in mind that the solutions suggested are not judged solely on their' merits. There is a natural and very powerful opposition on the part of those institutions whose profits depend on the maintenance of the existing order, and there is also a supercilious attitude which many people mistake for an evidence of their own superiority. , . . _ Amongst other schemes which Jeavons mentions there is one in which it is advocated that governments should issue, independently and on their own authority, money sufficient to cover their requirements on expenditure for internal services, with the proviso that such money should revert to the government by means of future taxation. The objections to this scheme would probably be that such money has no intrinsic value, that it could not be accumulated or invested, and that it would not be generally accepted. But a government is not concerned with money in the same way as an vidual; it is concerned only with the

performance of such services as the community, through its executive, requires. Money issued by it would merely circulate and effect the necessary exchanges. It could not leave the country in which it was issued, as it would be quite valueless outside it.

The alternative to such a scheme requires, in. a new country, at any rate, an initial amount of borrowing. Such a procedure has been adopted in New Zealand, though with a reckless prodigality and culpable indifference as to its ultimate result. It may be pointed out, however —and this has a bearing on the present financial position of New Zealand—that when money is thus borrowed by a government, the government has a certain claim upon it, no matter into whose pockets it finds its way. In other words, this money provides the counters with which the business of the country has to be transacted. If these counters are withdrawn from the country in any large numbers, the business of the country comes to a standstill. If vve bring money into a country as individuals we have a right to transfer it at our pleasure, but if the government brings it into the country it has a right and a duty to see that it remains there.-Yours, March 13, 1939.