"A HARD ROAD.”

Evening Star, Issue 22327, 1 May 1936, Page 12

"A HARD ROAD.”

TO THE EDITOR. Sir, —If there is any hard road about ] current Government legislation it is that pursued by those who will not even endeavour to understand the fundamental monetary facts which govern the whole situation. They may be quite sincere in their criticism of the Labour Party's monetary policy, but cannot escape condemnation for not trying to understand their opponents' case. Before anyone can claim the right to criticise an opponent's argument they must be competent to state that argument clearly. All we get from opponents of the new monetary policy and the legislation based thereon are querulous complaints and observations showing a lamentable ignorance of the elementary principles involved. That this lack of knowledge is not confined to politicians can be seen by articles appearing in your paper. That which appeared in your issue of last evening, which endeavours to perpetuate the erroneous idea that deposits result from thrift and savings, is a case in point. Since the leading banking authorities of to-day have already ad-

mitted that the banks do not lend their deposits it is surely foolish, to say the least, for anyone to infer that this is the means by which production is financed. It is also a trifle disingeneous to suggest that advances follow deposits. The banking text book, ' Economics of Enterprise' states: "Banks do not lend their deposits, but by expansion of credits (advances) create deposits." Is the anonymous of the article in the ' Star ' a greater authority than that quoted and ctb«rs which could be brought forward ? _ -■'■ In your editorial of this evening you say in defence of the Coalition Government, which the people of this country so decisively rejected, that it was because of the " promptitude and energy " of the aforesaid Government that- we are in the " improved position " of to-day. I think that the only promptitude and energy displayed by the last Government were a restriction of the people's purchasing power in a multitude of wage reductions, and taxations, which had the same effect. " Tightening our belts " was the constant advice of Mr Forbes and company, and it had the immediate effect of worsening the position. Regarding the alleged improvement in our economic situation, you neglect to state that what improvement has taken place lias been the result of very serious war threats and a consequent armaments race. As the threat of war is, in the last analysis, caused by flaws in orthodox accountancy which have not been rectified in any country in the world, it requires little imagination to sea that there can be no permanent improvement failing such rectification. The present Labour Government is the only Administration which is attempting to solve that problem. Its reward, to' date, is a medley of unjustified criticisms, and, in the caße of Mr Coates, a deliberate exhortation to flout the Government of the country. _ You go on -to sav that " there is no escaping the fact that New Zealand s prosperity is wrapped up in its export trade." 'That certainly has been the position up till now, but you assume, without any justification, that no other basis for our prosperity is possible, ine Bill which you criticise is an attempt, to get away from that position._ Again it gets only unsympathetic criticism. There is a great deal of emphasis on the assumed loss to the farmer if the world prices' are higher than the government is paying under the proposed legislation, hut little is said about the beneficial effect when world prices are lower than the Government pays. Mention is also made of the protection afforded the farmer by the Bill, and the peualised townsfolk who it is alleged will have to "pay the piper. It is evidently revolutionary that the farmer should 'be the protected one for a change.—l. am, etc., A - April 30.