THE GUERNSEY SCHEME.

Evening Star, Issue 22192, 21 November 1935, Page 9

THE GUERNSEY SCHEME.

TO THE EDITOR. Sir, —Kindly permit me to comment on your leading article on .the currency question. The. Guernsey Island experiments cannot be brushed aside as_a market scheme. The facts are that in 1815 the States (that is, the local Parliament of the Channel Islands) were recommended by their Finance Committee to acquire property and build a public market, repair a church, and make good roads. These schemes were financed by the issue of local notes to the value of £6,000. On October 17, 1816, there was a first issue of these Guernsey notes to the amount of £4,000 for “ coast preservation works, Torteval Church, and Jerbourg Monument.” The notes were to be redeemed and destroyed, so 'many every Saturday, and were to be completely taken off the market by April 15, 1818. In May, 1820, the fatuous market scheme to which you confine the Guernsey issue was begun, £4,500 of notes being_ issued for' the purpose, redeemable in 10 years out of import duties and the revenue from butcher shops. By September, 1821, the total interest —free notes in circulation—did not exceed £IO,OOO. So successful was the note issue that in March. 1826, the Finance Committee of the States (Parliament) was further authorised to issue notes to the total of £20.000 for the purpose of erecting Elizabeth College and building certain parochial schools. The Jersey ‘ Evening Post ’ is reported by the British-Labour Press as saying “that by 1837 over £557000 of interest-free notes were in circulation,” and in the ‘ Billets d’Etat ’ frequent references are made by eminent men of those times that had it not been for the issue of State notes important public works, such as roads and_ buildings, could not have been carried out, and this was done without interest cost to the island, the result being that the influx of visitors was increased, commerce was stimulated, and the prosperity of the island vastly improved.” After 10 years the bankers objected and urged that no capital works should be financed by the note issue unless the consent of the King in Council was first obtained. The_ Governor, Daniel De Lisle Brock, fearing this meant the consent of the bankers, spiritedly opposed this bankers’ dodge, and it was defeated. Three years later the banks appealed to the Privy Council in London, and that body asked the Governor, De Lisle Brock, for an explanation. His successful reply was published in the ‘ Billet for December 23, 1829. The bankers’ next dodge was to flood the island with paper money, hoping to deluge and discredit the State note. To avoid a continuance of this in 1836 an agreement was reached whereby the State notes in circulation were not to exceed £40,000. And right down to the Great War in 1919, the public issue remained at that figure. During the war the need for money was so great that an ordinance was passed allowing the issue to be increased, and to-day it fluctuates between £150,000 and £200,000, and British currency reformers tells us that in defending it as a source of great benefit to the island, the ‘ Jersey Post ’ says: “A loan of £175,000 at 5 per cent, redeemable in 30 years would cost the States annually £11,383 in interest and redemption. Our note issue for approximately the same sum costs us £450 per annum; so that it is up to every patriotic Guernseyman to use State notes in his local transactions, and by so doing keep down taxation which bears on each of us.” I would like to ask you why there should bo _ inflation if noiy notes are issued against new

wealth and cancelled as that reproductive wealth returns revenue as urged by Arthur Kitson in his pamphlet dealing with Guernsey Island experiments, entitled ‘ How to Finance Municipal Enterprises.’ Before the war, when all bankers’ notes wore convertible in gold, the objections to Guernsey notes had some validity. But now, when the security behind bank notes is script or in other words, the national debt, it has no validity, as much of that security was bonds issued lor war purposes, that bring no return other than the citizens can stand m taxation to pay. On the other hand, say the Guernsey notes, valued at £IOO,000, were issued to construct a tramway line and the revenue was 5 per cent, a year, in 20 years all the notes could, if desired, bo redcoined, which would mean that the citizens would have the revenue-producing tramline paid for; while, on the other hand, if tho money was borrowed. £IOO,OOO would be paid in interest and the principal still be owed. All currency reformers appear to agree on tho fact that tho Guernsey Islanders’ experiments have more solid wealth behind them than the script behind our fiduciary notes. In tho islanders’ case the reproductive works keep on earning revenue without extra taxation long after the notes are withdrawn from circulation. In our case the interest on the script accumulates perpetually.—l am, etc., ~ ~ J. E. MacManus. November 20.