CREDITS AND PRICES

Evening Star, Issue 18627, 7 May 1924, Page 3

CREDITS AND PRICES

BANKS HAVE SUPREME CONTROL. Major C. H. Douglas, a recognised authority on finance, has addressed to a friend a letter which is copied into tho ‘ Now Age ’ of February 7, and runs thus • I am enclosing you a report, as published in ‘ The Times,’ of the speech of Mr MTvemia at the ordinary general meeting of tho Midland Bank (late London Joint City and Midland Bank). I think that, vou will agree that this is a speech of quite fundamental and far-reaching importance. Read intelligently, it involves the following admissions: 1. The abandonment of the gold standard.

2. Tho categorical statement that bank loans create bank deposits, and that it is from this source that the major portion of our money is derived.

3. That financial policy is all-powerful in its effect on the economic condition of the area over which it operates. 4. That tho Bank of is finally in supremo control of this situation. These admissions should serve to dispose finally of a good deal of the controversy which, for instance, took place at Ottawa before the Credit Inquiry. There remains for decision the following points:—(a) Are the banks, as at. present constituted, the most suitable arrangement to have supreme control over the economic life of the community? (b) Even if this were granted, can they, as a matter of practical ability, function satisfactorily without dealing directly with the question of prices? In regard to ta),.you will notice that Mr M'Kenna decides in the affirmative by suggesting that the Treasury note and Treasury bond shall be abolished, and tho Banke of England give a sole monopoly. In regard to lb), it is, as you know, my contention that this is impossible. As an inductive proof of this, even with tho very met!era to amount of credit expansion which has taken place during the past year, prices have begun to rise in Great Britain, a.nd a recrudescence of strikes for higher wages is imminent.