CURRENCY QUESTION

Evening Post, Volume CXII, Issue 45, 21 August 1931, Page 5

CURRENCY QUESTION

(To the Editor.)

Sir,—With reference to the article' ia your correspondence column of last Saturday's edition under the heading, "The Currency Question: An Unorthodox View," I wish to make the following comments:-" While the correspondent, Sir A. H. Riis■ell,'appears to be correct in most of'liisassertions, particularly that of gold having | become the master instead of the servant !of humanity, his suggestion of the fiduci|ary.issue of notes, legal tender within the Dominion, to meet ■•'■ present would only accentuate the present difficulty. Any scheme embodying a central reserve bank and an internal currency issue would be of no economic value to New Zealand. It would be likely, to do grievou* harm in bringing about a false state of prosperity with a quick economic reaction following, owing to the fact that New; Zealand.does not represent a complete economic unit, and is dependent on the-ex-port of primary produce in return for importations of manufactured and partly, manufactured commodities—locally-manu-factured commodities representing a very Bmall percentage of the total amount consumed. . Therefore, an increase in local currency issues would bring about; anr increase in;local spending (the money would obviously be expended and go into cireula. tion by way. of wages and other liieansFre. suiting in an increased demand for imported as well as locally-produced commodities. The result would be an adverse trade balance if the Government was foolish enough to authorise the: central reserve; bank to borrow gold to bridge the gap of the adverse trade balance. The only other alternative would be to prohibit a large percentage of imports with the idea of bringing about the development of local secondary industry through force of necessity and obliging New Zealand citizens to pur. chase locally-manufactured goods. This- might have its drawbacks: on a» count of the small local market making • large percentage of secondary industries impracticable at the Dominion's present Kfse of development.. Therefore-* scheme tnat might do immeasurable good '.to'"a large secondary industrial nation; representing a more complete economic unit, in tne slough of financial depression, and lift its-citizens from chads to higher standard* of living, might h»ve the reverse effect oa a small primary producing nation.—l am* etc., .■■'-■■.."■ ■ ■''■.'.■■■.. ■■.'■! . '■

SAMUEL SCHNEIDiaiAN; [As the correspondent has referred to a central reserve tank it shbuld be made clear that a fiduciary issue does not enter into_the reserve bank scheme recommended by Sir Otto Niemeyer. Sir Otto stated that it was unnecessary to have a currency internally convertible into gold: "but it should be externally convertible, as it wa» in effect now by exchange on a basis of sterling.—Ed.] ; ■, . .