A Problem for Economists
Sir, —In your issue of October 3 I read a letter signed “Lieinius” under the above heading. The writer dealt with the increase of money (and money power) and its relative position to the growth of the world gold stock. This letter caused me to think and search, the result being that I am somewhat befogged. I was in hopes that some eminent authority would explain the position for the benefit of ordinary beings. As I see it, wealth or credit by way of interest is increasing like the proverbial snowball, at an alarming rate, and in time will become unweildly and valueless.
The Sydney “Bulletin” of August 27 last in an editorial on “Who’s got all the money?” shows that in the Commonwealth the trading banks held deposits of over £300,000,000 and the Government Savings Bank £74,000,000. This is a lot of money if it represented “real money.” Interest at 4 per cent, means £14,900,000 is added to the amount at the end of the year. This is credit, not real money, and so the thing goes on. Deflation of late has wiped out an enormous lot of this so-called money. The article goes on to show that only £16,000,000 in gold was in existence; this, of course, is “real money," and is only to be made in any country, (1) digging local gold; (2) attracting the gold of overseas tourists; (3) producing goods which can be exchanged for other countries’ gold in excess of the quantity required to pay for imports and foreign interest. As the Commonwealth for years past has shown an adverse trade balance, the credit value must have become less. This is apparent to all who think.
But how fares New Zealand? Certainly much better than the Commonwealth, simply because during the last few years New Zealand’s exports show a credit of £43,500,000 over imports, but for gold money we are not much better off than the Commonwealth. The banking returns just issued show that the trading banks hold £31,747,000 of fixed deposits and £20,803.000 of free deposits; also that £51,399,000 is loaned out. Interest on the fixed deposits at 4 per cent, would add £1,269,000 to the so-called money deposits. The Government Post Office Bank holds deposits amounting to nearly £so.ooo,ooo—this at 4 per cent, adds £2.000.000 to the credit of depositors. No doubt but that the money is wisely invested, but deflation, if it goes on, will seriously affect the securities, especially as of late years the Government has been lending up to 95 per cent, of valuations. The bank note circulation is £6,039.000. From this and the gold, £6,838,000, we seem to have accumulated credit deposits of over £100,000,000. Of course some will say, “Look at the buildings we have erected; look at our railways, roads, etc.” Yes, but unfortunately we have to pay interest on the money spent. What is there behind the £100,000.000 of deposits or credits? Accordingl to the returns, £6,838,000 coin and bullion. Is there not need for care and economy? Possibly someone will put the position before the people from the economist’s point of view, not from a politician’s.— I am, etc., ADHIKARI. Wanganui, October 13.
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Bibliographic details
Dominion, Volume 24, Issue 19, 17 October 1930, Page 11
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533A Problem for Economists Dominion, Volume 24, Issue 19, 17 October 1930, Page 11
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