REAL WEALTH OR GOLD.

Evening Star, Issue 22379, 1 July 1936, Page 11

REAL WEALTH OR GOLD.

TO THE EDITOR. Sir, —If there is anything in this fold standard, to which your corresponent, Mr Moss, is so devoted, the French and Belgians will know of it, for their countries are counted among the very few still adhering to what has been aptly described as the international money-lenders’ lure. _ And the reaction of French and Belgian people to the “ benefits ”, of the gold standard has been the theme song of the cable news for some time past. If Mr Moss were to read history he would discover that the industrial and social distresses of _ the past 150 years have had their ultimate origin in this queer belief that gold gives money its value. On the contrary, that it is its use as money which gives gold its value will be obvious to anyone who asks himself what the value of gold would be if its use as money was suspended. . It is only because very few people ever ask

this question that the financial monopolists have acquired the right of creating demand and also of abolishing it at their pleasure. Since the financiers of England took the advice of the Dutch banker who wrote in 1652, “do as we do in Holland, make money a merchandise,’’ the money power has been able to set itself in the place of humanity as well as in the place of kings. _ When the international financiers will that production shall take place they expand credit; when they will that production shall cease credit _is restricted. , Thus hdom and slump have been made to follow each other in endless succession. But we have in this country a Government charged with the duty of restoring control of financial policy to the Crown and entrusted with the task of making this a nation of consumers as well as producers. By its recent legislation the Government has taken power to control financial policy, so that it now behoves every citizen to assist it in the task of equating consumption with production! The problem involved is: How can the people of New_ Zealand as consumers enjoy higher real incomes and the benefit bf shorter hours without prejudice to their varied interests as producers, and at the same time secure the progressive reduction of taxation? The core of this problem is price. So long as higher nominal incomes are offset by rising prices there is no progress. On the other hand, if prices are arbitrarily fixed either the level is too high for consumers (as is the case with bread and butter to-day), or it is so low as to hamper-industry, and either way the community is in for trouble. It seems obvious that what is required is some flexible method of regulating prices which will automatclally balance effective demand against total ’prices and allow for industrial cost variations. A price-regulating method of this character would provide: (1) That goods for consumption should be offered to buyers at a proportion of their financial cost; (2) that this proportion should be calculated in' accordance with industry’s capacity to meet the increased effective demand; and (3) that the Treasury or the Reserve Bank should reimburse to the vendors, upon' proof of sale, the amount they were consequently out of pocket. Such a method allows no room for politics, but calls for the keeping of a proper statistical record of total national consumption of , real wealth and total national production of real wealth year by year. At the beginning of each year the statistical authority would publish a “price factor,” expressing jn the form of a fraction the relation of total consumption to total production for the previous year, and vendors would offer their goods for sale at financial cost multiplied by that fraction. Upon proof of sale vendors would then be reimbursed the amount they were out of pocket from new money created by the Treasury or the Reserve Bank on the basis of the net appreciation of national real wealth. As a rough illustration", suppose the financial cost of total production for 1936 was £1,000,000, and the financial cost of total consumption for that period was £BOO,OOO. In December the Government Statistician would publish these figures in the form of a fraction, thus, 4-5, and during 1937 retailers would sell goods at 4-oths of financial cost. If during 1937 the financial cost of all goods consumed was £900,000, for instance, the total price paid by consumers would be 4-sths of that sum —namely, £720,000. The State would then provide retailers with the balance of £IBO.OOO by an issue of new money or credit, backed by the £200,000 of additional wealth produced during 1936. The operation of this method would enable industry to operate on shorter hours without cutting wages, and would ensure that the purchasing power of the people’s income increased. Mr Moss’s pound, for instance, if the discount was 20 per cent., would be increased in buying power by 25 per cent. Prices being lower and buying power more abundant, more orders would be given, and in this way the consumers would reap the benefit of each increase in national productive capacity. The increase of orders would stimulate industry, and more jobs would be available. Gone would be the need to look abroad for markets, as a vast and ever-expanding market would he waiting at home in New Zea-

hand. Export trade would consequently assume its correct place in our national economy, and become the exchange of the surplus of local agriculture and industry for the surplus products of other nations. Unless the money system is brought into line with physical facts by the introduction of some such automatic regulation as that indicated, there seems little doubt that the control of financial policy by Parliament will prove illusory, and we shall one day get back to the old system, to slumps and booms, and slums and social reform, to starvation and over-production in short, back to the “ inexorable economic law ” gold standard worshippers prate of, which, as history proves, is a law designed to sacrifice the whole universe iq> order to make the universe safe for high finance.—l am, etc., July 1. Bluequh.