“To Lift the Depression”

Dominion, Volume 24, Issue 110, 3 February 1931, Page 7

“To Lift the Depression”

Sir, —I am somewhat flattered that my letter on the above subject in “The Dominion’’ was of sufficient import to attract criticism from the N.Z- Welfare League. ’ ■ In regard to the issue of Treasury notes (redeemable) as suggested by me, the N.Z. Welfare League refers to the “Guernsey Market House Scheme.” This, I would point out, is not a parallel case inasmuch that my scheme provided for a sinking fund to pay off or redeem the notes, whereas the Guernsey House Scheme made no such provision.. The N.Z. Welfare League suggests that as the issue of Treasury notes would not be backed by gold; it would be unsound finance. May I ask are Government bonds backed by gold? Admitting the issue of Treasury notes would be a step toward inflation, can inflation in some degree be avoided at the present time, if we are to find a remedy to meet the extraordinary conditions? If such inflation increases prices, would not the advantages outweigh same, and would the increases be confined to the imported or exported commodities? The adverse exchange as pointed out in one of the leaders in “The Dominion” of recent date means an increase of approximately some £600,000 in our interest bill. Surely such a substantial increase warrants some provision being made to meet this extraordinary additional increase? The shortage in our export values must necessarily be made up from some source to meet this demand. Some form of inflation therefore must take place (or extra borrowing) to meet this increased liability. Providing the Government makes provision to redeem the Treasury notes, there would be no occasion to interfere with the metallic currency. In issuing Treasury notes the Government would be really lending money against future revenue. If the Government raises a loan from overseas of £5.000.000 it does not deposit gold but pledges the resources of the Dominion as security. So with the Treasury note issue, hut without flotation costs.

In regard to the question of mortgages on rural lands and farms, a possible solution would be for the Government to take over approved mortgages and to pay the mortgagees out in Government bonds bearing, say, 5$ per cent, interest, and keeping the farmer on the land by giving him in lieu of the mortgage a Government table mortgage extending over, say, a period of thirty years, to expire a few years before the bonds became due. thus enabling the Government to comfortably make provision for payment of the bonds on maturity. The adoption of the . above two schemes would give immediate and immense relief to the country at'the present time, making available big sums of money for developmental purposes and would give immediate- relief to the unemployed problem. If would further cheapen the price of money, which is the most urgent need of the moment, as it is the high rate of interest which is intensifying our economic problems. I might point out that whereas the farmer’s income has shrunk consequent upon the low prices of our products, he still has to pay the high rates of interest, which were fixed when the prices of primary products were high, so that if for example the farmer’s income has fallen from, say, £5OO to £3OO, the income of the money-lender still remains the same, although he can buy most of his needs to-day on a much reduced cost The marked changed conditions in the Do minion require immediate and unusual methods to bring about the necessary adjustment.-! am. etc., “TRADER.” Christchurch, January 31.