CORRESPONDENCE

Evening Post, Volume CXXXI, Issue 103, 3 May 1941, Page 8

CORRESPONDENCE

INFLATION DANGERS

(To the Editor.) Sir,—Referring to the article in are cent issue of "The Post" on inflatior the following extract is from page 287-288 of "The Storm Breaks," b; Frederick Birchall, chief European cor respondent of the "New York Times, 1932-39:— "A simple means of obtaining.mone; would have been to print it, all Germa: money above five marks being in th form of paper, but that means of re lief had to be ruled out, although th party radicals were all for it. .Th more money you print the less valu it has. All Germany remembers th inflation following the war, and wha was suffered when the mark was aJ lowed to fall close o zero, so that th Government might wipe out its debt! The one thing the German people wi] not stand, from a Nazi Government o any other, is another inflation. So in flation, except by stealth and indirec tion, has been impossible."—l am, etc J.R. "Win the War" writes: "Whilst ap preciating what was written agains inflation in your columns, I submi that nothing is more inflationary tha: taxation. Every increase in indirec taxation raises prices and every in crease in direct taxation is, to th qonsumer, equivalent to their bein raised. I deplore the use of Reserv Bank currency and credit which mus be repaid by taxation. If the financin of this war carries with it any loss t that institution, then let the people o this Dominion require that it shaJ carry forward such loss—a mere matte of figures—indefinitely, ' and let th trading banks earmark an equivalen sum as being unavailable for loans We cannot win this war by being mad financially poorer nor yet by buildin, up enormous sums of interest-bearin, debt. We must use our institution to serve us in these days of dire nee! and consider neither 'profit' nor 'loss.' Contending that the "drastic am deadly policy of deflation caused am intensified the working class sufferin, of the great slump of 1928-36," Joh] Tucker writes: "Whether it be inflation or deflation engineered by capitalist! motives, irrespective of human con sideration and human needs, the re suits will be the .same. The Rt. Hor. Peter Fraser said, 'The Government i determined to avoid inflation as far a possible.' It is hard to define wha is meant by inflation in New Zealanc We are served by an inconvertibl paper money system. W. F. Marrioti in his book 'Grammar of Political Eco nomy,' page 119, says. 'The State migh issue inconvertible money in sue! quantities that it could never excesi the needs of internal exchange; and h that case, the inconvertible noted wil not raise prices.' I can see no dan'ge of the Government issuing inconvert ible token money, greater than tin price level demands, but I can see th dapger of the failure to control price forcing a greater note issue. Mr. Rober Gillespie, the chairman-of the Ban! of New South Wales, saw this whe] he said* 'Whilst in no danger of suffer ing from extreme inflation, we mus guard against excessive rise in th general price level.' The Governmen may issue inconvertible 'token mone; to carry out the war, which wouli mean borrowing free of interest. an< a mode of taxation, or it may appl; such money to the greater productioi of utility goods for the country's use which would not be inflation, because | the goods produced and distributee i would pay £or the issue. Goods ant ! services are -•real, money, and to th< extent we in New Zealand can product the goods, and. at the same time kee] down costs, which means wages, inter jest charges, and even taxation nov bearing heavily on industries essentia to greater production of useful goods the less fear will we have of the bogj of inflation." (To the Editor.) Sir, —You are to be congratulated foi giving publicity to the dangers of inflation as stated by the Sydney "Bulletin." Much danger lies 'in the public misapprehension that an uncontrolled issue of credit or .currency will provide a cure-all for economic ills. Would it not be a wise move on the pari of the Government to discover exactly how much real wealth (goods and service) this country can produce, makt public the figure, and see to it that the Reserve Bank issues that amount oJ credit and not a halfpenny more? A j further suggestion, without which the I foregoing idea might have inflationary effects, is to adopt a plan similar tc that empldyed, I believe, in England That is that a large portion of this credit issue should be used to enable retailers to reduce prices by means oi a bonus paid to those who accept less 1 than a stipulated rate of profit. I opine that this would be more -acceptable than a rigid fixation of prices and would nail the inflation down for good —I am, etc, T. O. MADDISON. Comment is. made also by G. H. Wilkin on the articles on inflation, and the correspondent suggests a further article comparing the financing oi the Government housing scheme from the Reserve Bank with the present method of raising money for war purposes by taxing, borrowing, and gifts. "The Housing Department came into existence without any tangible assets except a cheque from the Reserve Bank for £5,000,000 (New Zealand), which was issued without any fuss or bother. The result was -thousands of new nouses without unwanted and spurned fivers lying about. Now, when the Empire is in ' peril and the need for finance and production is essential with the greatest speed if we desire victory we calmly watch the methods in use to raise patriotic funds. While this is going on our boys overseas had to evacuate from Greece not because the fighting qualities have in any way .deteriorated, but because their equipment was not in supply comparable with that used by the enemy. During the last decade the bogy 'inflation has been responsible ,for this position in the Empire. Did not the Dominion abandon the proposed iron industry? What would we give to have it now?" [It should be pointed out that financing a housing scheme which creates enduring assets is not comparable with financing a war, where assets are destroyed. Even the housing credit has its drawbacks as the created money renders idle actual savings credit. To suggest that hesitation to use credit or any other financial means is responsible for the present inferiority of democratic war equipment is to ignore completely the revealed facts of recent international history.—Ed.]