FINANCING STATE HOUSES

Gisborne Herald, Volume LXXII, Issue 21852, 24 October 1945, Page 4

FINANCING STATE HOUSES

Sir, —The arguments that are constantly being put forward to the effect that the Government, by paying through the Reserve Bank for State houses is thereby creating surplus •money and bringing about inflation, are far from correct. There is no more money being brought into circulation by this system than there would be if the loan were raised in England. When the Government wants State houses built, a contract is issued to private enterprise. Both labour and material are steady. All the material to be used is bought from private enterprise, and is paid for from a Government credit with the Reserve Bank, instead of the money being borrowed from London. The contractor pays for labour and material, thus giving work to the otherwise unemployed. The profit is his own; he may either spend or invest it. All that the Government has done is to bring labour and material together. The rent from the houses goes to pay off the loan granted to the Government by the Reserve Bank, plus a little extra for services rendered by' the bank. The debt is then wiped off. It is therefore impossible for any extra money/ to be brought into circulation. Those who argue to the contrary say that the Government should raise a loan in London to cover the scheme. They that this would not bring about inflation. They would sooner pay interest on the loan in order to perpetuate the system than to benefit the people of New Zealand by allowing the Government. to continue as it has done without creating either a lasting debt or a surplus of money. N. HILLIARD.