Standing on their Heads

Press, Volume XCVI, Issue 28435, 15 November 1957, Page 14

Standing on their Heads

One of the most curious features of the election campaign so far is the enthusiasm of Social Credit candidates for the Monetary Commission. One would hardly imagine from their speeches that their leader (Mr W. B. Owen) had refrained from giving the commission the benefit of his ideas; that the Social Credit witnesses who did appear agreed neither with each other nor with Mr Owen; and that the commission mercilessly exposed the folly of “ funny money Indeed, Social Credit candidates, perhaps because the commission’s report left them with very little of their doctrine to talk about, now appear to foster the impression that the commission almost identified itself with Social Credit. Thus, Mr G. ’R. Lynne, soliciting Sydenham votes, asserts: “ We have proved " that money is created out of “ nothing by the banks, and the “ Monetary Commission bears “ us out ”. Social Creditors proved nothing of the kind, and the commission’s method of bearing them out was to say: ** This is a gross exaggeration of the power of trading “ banks Elsewhere in the report, the commission, explaining why “ banks cannot create money at no cost to themM selves ”, points out that a bank must have sufficient cash not only to meet any conceivable demand by its customers but also to preserve customers’ confidence in the bank’s ability to do so. In practice, a bank finds itself safe if its cash reserves are between a fifth and a quarter of the credit balances of depositors. Its power to *’ create ” money depends on the fact that money advanced, or some of it, returns as deposits, and it has to attract these deposits by giving service'

to its customers. The commission, incidentally, noted that the trading banks have no monopoly of the creation of credit. If Mr Lynne’s account seems a remarkable distortion of the commission’s findings, it is perhaps no more remarkable than his bracketing Mr Nash and the editor of “ The Press ”, with which, we are fairly sure. Mr Nash, for one, would not agree.

Mr Lynne’s adoption of the Monetary Commission is no more remarkable, either, than some of the other claims of Social Credit candidates. Mr J. E. Colechin, for instance, has been telling Riccarton electors that Germany is forging ahead because it freed itself “ from “ the shackles of the private “ banking system ” and adopted a Social Credit principle. If any country in the world has applied strict financial orthodoxy (and profited from it) it has been West Germany. The American writer, Joseph Alsop. has written of its “ tough, con- “ servative, economic policies ”. Are we really to believe that this is a description of Social Credit? These policies are administered through a central banking system using much the same methods as the Reserve Bank and the trading banks in New Zealand. The Germans, after all, in living memory have had two terrible experiences of easy money, in which their savings were wiped out. They have every reason to appreciate the value of sound money. Just what they would say to hear this confused with Mr Colechin’s brand of inflation is probably beyond the imagination even of Social Crcditers. who are rather like men before a looking-glass. They have a singular faculty for seeing things the wrong way round.