Currency Shortage

Dominion, Volume 27, Issue 74, 20 December 1933, Page 13

Currency Shortage

Sir, —After reading the letter “Currency Shortage” published on December 15, I would like to ask the New Zealand Welfare League a question. Is it not expressing the same opinion as Mr. Wilson that there is a shortage of currency! hor what purpose other than to'increase the currency in circulation should the people loosen their purse .strings and spend? The league also states that cheques are for all practical purposes just as much currency as notes and coins. This statement is correct up to a point. Cheques are capable of transferring credit from one current account to another, but it is impossible for that implement of credit to start fresh credit in circulation; whereas notes aud coins, being legal tender, can be used by a Government for that purpose through a central reserve bank. It should be one of the first duties of a Government to increase the amount of currency in circulation when a shortage is hampering normal trading. The cuts, retrenchments, stoppage of public works, the general curtailment of the activities of commercial houses, and the excessive internal borrowing of the Government by the use of Treasury bills (which accounts for the extra amount of money on deposit) should be ample proof to the New Zealand Welfare League that, a supply of fresh currency in the circulation stream is an urgent necessity.—l am. etc.. G. H. WILKIN. Wellington, December 17.

Sir, —“Equity” jumps to a wrong conclusion—we were not “defending” any money or currency system, but merely pointing out a fact too often overlooked, namely, that there are enough notes and coins in existence to carry on the business and services in New Zealand even in prosperous times. Thus, it is not. a shortage of currency, as alleged, which has caused the depression, but its want of circulation which is a material factor in its continuance.

“Equity” says: “Having more money on deposit than at any time in our history is no solution, as the league knows quite well.” Did we say it was a solution? Certainly not! We instanced this accumulation of money on deposit as clear evidence of the fact that those people who owned it have temporarily lost the will to spend or invest, and we deduced from this the view that it was not a shortage of currency so much as a lack of confidence and fear to spend that was hampering recovery. While this condition lasts the printing of more notes would only result in larger holdings in the banks. “Equity” objects to the “worn out and disparaged cry of those having the income to spend a little more.” He may be an authority on the subject, but if so he differs from Mr. Ramsey MacDonald, “The Times” (London), and many other noted authorities who have urged and still urge freer spending by those who have the resources. Your correspondent asks: “If we are not consuming present production. what can these people spend , on?” The answer seems to be self-evident, namely, spend what you can on the unconsumed portion of present production, and thus help the producer and trade generally. We regret that “Equity” considers we do not act up to our name because we cannot increase consumption and place the unemployed back to work. Isn’t this rather a cheap gibe from one whose letter is an attack on us for suggesting at least one method of increasing consumption? —We are, etc., N.Z. WELFARE LEAGUE. Wellington, December 19.