WAR LOANS.

Evening Star, Issue 18032, 28 July 1922, Page 3

WAR LOANS.

TO THE EDITOII Sir, —Tho ‘ Investors’ Chronicle and Money-Market Review’ of May 15, in dealing with Labor’s proposed taxation of and cut in war loan interest ns a preliminary to its abolition, says : “ This unproductive capital enjoys a unique privilege in the matter of security. It has the backing of the State.” The paper claims that it “might be fairly called upon to bear a larger share of "the cost of maintaining that national credit on which it relies.” But as “Wage Earner” is not convinced yet. I quota from Mr Malone, M.P., in the House of Commons. He says : “ A sum of £1,000,000 lent to the Government on war loan during 1918 was to get £60,000 a year in interest. That £60,000 could purchase X tons of coal, Y bags of wheat, and Z houses. But the price of coal, wheat, and houses has fallen by half since 1918, and to-day the £60,000 means 2X tons of coal, 2Y bags of wheat, and 2Z houses. In other words, tho value of interest has doubled. Now, the interest is raised by taxation, and taxation means commodities, so that the people of the country have to pay double tho quantity of commodities to the holders of war loan stock that they paid in, 1918. And not only that, but when we pay off the capital value of the war loan we find the same appreciation in values. Tho war loan has to be paid off in taxation, and that, again, means commodities. The £1,000,000 we, the nation, borrowed in 1918 can to-day purchase twice what it could purchase in 1918, so that when we pay off that £1,000,000 we have to give (on 1918 prices) £2,000,000 worth of commodities lor it. In other words, we are paying back twice what we got in loan, besides doubling the real interest." I am sorry to be forced to trench so much on your, space to prove what is so_ obvious to anyone who has given financial questions a moment’s consideration.

“Wage Earner” told us in his first letter the money was lent for patriotic reasons. Well, Mr Blacket (British Controller of Finance), giving evidence before a committee of inquiry of taxation, said_; “ Some scheme of quick redemption is imperative. The burden of interest must be reduced, or industry, will break beneath the strain.” Mr Neil MnoNeil, M.P., said; “. . . You appealed then for

men to volunteer. You found you had to conscript them. Let tho Chancellor of the Exchequer appeal to the holders of war loans 'voluntarily to accept a lower rate of interest; . . . and if you find you cannot effect a sufficient saving by voluntary methods do as you did during the war —apply conscription.” If there are any conscientious objectors, wc surely have some excellent precedents to bring them into line. I hope “Wage Earner” is not one this time.

Labor does nob stand for repudiation. It has a scheme for utilising our war bonds. Wo are often told our war bonds are so much tied-up fluid capital drawn from New Zealand industries. They toll us this capital, tied up in bonds, hangs ns a millstone around existing industry, drives up the rate of interest, and mokes recovery more difficult. Mr Lloyd George on September 15,1920, said : “ No effort can shore this system up much longer. If there be any who feel inclined to maintain it, let them beware lest it fall upon them and overhelm them.” Labor bv constitutional means proposes to alter it. Labor proposes by a nationalised banking system to “ furnish means for the rapid transformation of those interest-bearing bonds into fluid forms of capital, so that it can flow once more into the Channels of industry, fertilise the productive forces of the country, and reduce the percental burden upon the annual output.” Labor does hot favor a national bank to function ns a central to buttress private institutions. but one by which the internal debts and tho annual burden of interest norm production cun be lifted, and the stream of credit now bottled np in bonds c.an bo made to flow along the channels of new production. Labor claims'that upon these lines, and with other safeguards, a system of economic reconstruction can be consistently -and successfully developed.—l am, etc.,. J. E. MaoManus. July 27*