AN ECONOMIST’S NOTEBOOK

Dominion, Volume 29, Issue 220, 13 June 1936, Page 9

AN ECONOMIST’S NOTEBOOK

Rearmament

(By

M. B.)

Thanks tn widespread investigation, it. is now becoming increasingly wellknown that armament manufacturers are the most practical internationalists of the day. While butter and food imports are everywhere rejected, guns are more welcome even than gold. According to Mr. Duff Cooper’s recent statements the probability of Britons being shot with British gnhs has made little impression oil the official mind—not that this is so surprising, for after all it Is not the official mind that will be shot. A curious replica of this situation is occurring to-day. At a time when England has undertaken a huge £300,090,909 armament scheme largely in answer to Germany’s rapid rearmament. there is talk in financial circles at Home of Germany raising a loan in London shortly "for without it sbe cannot continue to finance her rearmament much longer.” Britons will no doubt look with joy and thankfulness at the prospect of being able to make another £300.000,000 reply to this challenge of their own begetting. The paradoxes' of war finance have recently been given a humorous turn bv American universities. After th-; passing of the veterans’ bonus earlier in the year, a. movement was started in the colleges calling itself the "Veterans of Future Wars.” The members maintained with unimpeachable logic that as they were going to be killed in the next war and would be unable to spend the bonus after death, an honourable government had no option but to give them an exactly equal bonus then and there. Women students started a slniuai movement as "Mothers of I' utuie A etei ans.” Despite attacks in the Hearst Press, the movement has grown to a considerable size. Testing The Franc

It is a fast dying custom of secondary schools and other similar institutions that "new boys” should be initiated with mock and often cruel ceremony. French investors, imbued with the same sadistic principles, seem determined that every new Cabinet —and they are as common as good cooks' in I- ranee—should be faced to run the gauntlet of

a "run on the franc.” Even before the recent election the financial editor of one big London daily prophesied such a run as almost inevitable. It there is a swing to the Left, he mantaiued, rentiers will be alarmed for the safety of private property; if there is a swing to the Right, they will soon be equally alarmed by a Cabinet with a more truculent external policy. This French schoolboy practice only makes it harder for the French themselves. Each successive Cabinet, as one of its measures for checking the rot, has used the orthodox expedient of raising the bank rate. This means tin addition to the interest on the national debt which one authority has estimated at 1.000,000,090 francs. By piling the necessity for this extra expenditure on each new Government, the rentier successfully destroys any chance of reducing taxation or extending social services. As this extra interest is paid to rentiers they cannot be said to bear the burden of their own folly. Costless Credit

In his speech upon the adjournment of Parliament. Mr. Forbes ventured a hope that the secret, "Where's the money to come from?" would be. revealed after the recess. Mr. Savage has credited Mr. Nash with solving the money problem, but so far it has remained a close Cabinet secret. Speaking on the Keserve Bank Bill Mr. Nash suggested that his method of financing would not be altogether orthodox. The only unorthodox method that has been suggested is the issue of costless credit. Yet when asked to apply this expedient to the Mortgage Corporation Mr. Nash replied: "We could not select some aspects of our financing and apply that policy without applying it to all of them.” This objection applies to the use of costless credit anywhere, and the only logical deduction is that Mr. Nash is not going to issue tiny costless credit at all. But as the Government could determine exactly how much of such credit it was going to use and where it was going to use it without making the Slightest difference to the rest of its policy. What is the Pound Sterling? Excursions of lawyers into economics are not always happy, and the Court of Appeal has recently given two decisions that certainly do not clarify its opinion of what the pound and the pound sterling are. (1) In the Auckland Transport case the word ''pound" in a debenture issued in New Zealand under New Zealand statutes was held to mean the English pound or pound sterling, if the holder resides in England. (2) In the Ballantyne case, reported on Thursday last, it was held that the word "sterling" in a contract made in England for performance in New Zealand means nothing and adds nothing to the word "pound." I commend this to the forensic fury of our jurists and lawyers as an inconsistency that, will strain their wellused powers of ''reconciling.” The simple truth is that since our exchange depreciation the two currencies have become entirely different, and that when we use one word to refer to two different objects there will always be confusion. The “pound sterling” is traditionally the currency unit circulating in Great Britain at the time of speaking. ami mu' New Zealand currency Ims no better right to the name "pound” than the French franc has. The only way out of such difficulties will be to find a new name for our circulating currency. Invention. From time to time forecasts anticipating the dissipation of natural resources are broadcast with a forbidding gloom that economists must have learned from Dean Inge. Iron deposits will only last so many years, and even the sun will ultimately lose its heat. Just recently we have seen two striking examples of the inventiveness of man in overcoming these difficulties. Italy, faced with a shortage of petrol, Ims experimented with substitutes. In April was run the Mille Miglia. the world’s longest road race, in which 20 cars were driven on charcoal gas. and four on different blends of alcohol and fuel distilled from asphaltic rock. Signor Mussolini’s car was driven on a mixture of 9G per cent, ethyl alcohol and a 4 per cent, mixture of water and castor oil. In America the Ford Motor Company has been experimenting with the soya bean, from which it obtains oil of about tile quality obtained from linseed. and a meal that is well suited for moulding Into automobile parts.