Inflation Talk

Dominion, Volume 24, Issue 147, 18 March 1931, Page 11

Inflation Talk

Sir, —Under the above heading the New Zealand Welfare League contributes an article in to-day’s "Dominion” condemning all suggestions advocating inflation as a remedy for Australia s financial difficulties, but as deflation is the primary cause of “Australia’s difficulties it would appear that inflation is the remedy. As reported in your issue of the 13th ult., the distinguished economist, Mr. Francis Hirst, speaking at the National Liberal Club, London, said: ‘AU nations and Governments involved in the war debt question if they only recognised their interests would participate eagerly in a concerted effort to stabilise the value of gold. The case for the readjustment of war debts and reparations contracted when gold was much less valuable is now overwhelmingly strong, and presents no practical difficulties. An ounce of gold has now doubled, or more than doubled tbe purchasing power it had when Britain incurred her war debt to America. The British annual payments of £33,000,000 are really £66,000,000. A fair payment of interest and principal would be £16,500,000.” There .is no douljt all countries with the exception of Britain and America would rush this opportunity if it presented itself. However, Britain is not likely to advocate this course to balance her loss,' through deflation, on her payments to America, when the British Government’s receipts alone, from foreign investments for the year just ended amounted to £238,000,000, which is really £476,000,000, when a fair payment would be approximately £119,000,000. - It will therefore be seen that deflation pays Britain’s contribution to America, wipes off the debt of the unemployment insurance fund up to date, and leaves a credit balance of between £15,000,000 and £20.000,000. The effect on Australia and New Zealand is just the reverse, for instead of Australia paying £35,000,000 in interest, she really pays £70,000,000, and New Zealand, instead of £8,000,000, really £16,000,000. It will therefore be seen that any talk of arresting the progress of deflation, as far as London and New York are concerned, will fall on deaf ears, though a modified degree of inflation would no doubt be welcomed by all other countries.

It is not surprising: that there are considerable numbers of unemployed in Britain and the United States, for the simple reason that as the debtor countries are paying double in interest they_ have not so much to spend in the purchase" of manufactured goods. If the New Zealand Welfare League can secure the adoption of a plan whereby Australia and New Zealand can save the many millions which they are at present being robbed of by deflation, the league will at least have justified its name, but it need not expect to be proclaimed by London as the saviour of the situation. t Tn conclusion, I would suggest that the New Zealand Welfare League give Australia, as a friend in distress, its moral support, as it is quite possible Australia will be over her troubles before New Zealand, and some support from that quarter may be acceptable.— I am, etc,, ZEALANDER-