THE WAY OUT

Grey River Argus, 27 April 1932, Page 8

THE WAY OUT

(To the Editor.) Sir, —In his letter which appeared in your issue of the 21st inst., your correspondent. Mr W. B. Crawford made an attempt to “treat critically’’ the proposals made by Mr F. L. Turley but in doing' so, not only demonstrated that his “training’’ in economics is decidedly scanty, but also showed a complete lack of knowledge of the .essential features of Mr Turley’s proposals. He incorrectly assumed that Mr Turley proposed to spread the issue of his Government notjes over the whole period (four years) during which the wage tax is to be levied. If the Government were to adopt Mr Turley’s proposal, as interpreted by your correspondent, then instead of paying the money to be raised by the 1/- in the £ wages tax, directly to the unemployed in the form of wages, it would set this money aside, and issue notes to be redeemed from the fund so created. This is simply a roundabout way of putting into effect the scheme at present proposed by the Hon. Minister for Unemployment.

Although Mr Turley did not state definitely when the note issue was to b e made, I think it may be assumed that the full £20,000.600 were to be issued during the first year of the plan and the leconomic recovery brought 1 about by the inflation of this currency would solve our unemployment problem. It is true that Mr Turley went out of his way to deny that his scheme was inflation, but I think that if he went into the matter thoroughly he would come to the conclusion that the principal economic effect would be to put more money permanently into circulaation.

I do not think that Mr Turley need be afraid to associate his name with inflationary proposals, as thie idea of controlling the issue of currency to ensure stabilisation of the price level is being advocated by leading economists throughout the world, and the subject hag been freely discussed in New Zealand during the last few months. The man i n the street has been confused by the necessity for “honest finance” and other such platitudes that have been so freely trotted around the country of late. It is now generally accepted by many authorities that the p'resent world slump has been deliberately caused by the operations of the United State s Federal Reserve Board, the policy of which has be,en largely influenced by powerful financial interests. By the exercise of the enormous power which has been vested in them, tit? members of this Board are able to reduce the general Drice level by withdrawing currency from circulation (deflation), and to increase the general price lev,el by the issue of ad-, ditional currency (inflation). During the last ten years, the Federal Reserve Board has consistently pursued a policy of deflation in order to reduce the general price level and to increase the value of money with the object oF enriching the creditor classes at the expense of the debtor classes. It was at their dictation that the British Government decided to withdraw from circulation the treasury notes that were issued during the war and to resume the gold standard in 1925. This deflation •f currency in England almost ruined British credit last year, with the result that it was found necessary to abandon the gold standard. What happened in England is an example of what has , been go ; ng on throughout the world during the last decade, and the inevitable results have made themselves felt in this country in the form of our present difficulties. The slump in prices obtained overseas for out primary produce has therefore been deliberately brought about by the deflation policy pursued by the money manipulators at [ New York, with the result that the volume of currency has been automatically reduced and our internal trade brought to a very low ebb. I do not say that the deflation policy has been followed by our New Zealand banks, as this would not be necessary to accomplish the ends of the money monopolists whose strangle-hold on this country would be adequately accomplished by the sure and silent operations of the vicious circle of deflation started by them . Now, if there is one thing more than another, that should be under Government control, it is currency. Under our present system of monetary control, the banks have almost a monopoly of issuing currency and as they represent monied interests, it is not surprising that they use this p’ower entirely to serve their own ends which are not necessarily identical with the interests of the general public. If the sole power of issuing currency in New Zealand was placed under public control, then our monetary system could be relied upon to operate for the public good, and our purchasing power could be made to remain constant. The way to overcome this difficulty is to establish a State Bank with the sole power of issuing currency, the latter function to be under the control of an independent tribunal, the members of which would b>e appointed by the Government a ud n omni a ted by various organisations such as Trades Unions, Farmers’ Unions, Employers’ Federation, private banks, etc. It is both just and Reasonable that currency should not he manipulated for the purposes of private gain, as it serves as the universal medium of exchange and standard qf value, the basis on which contracts are made between debtor and creditor, employer and worker, etc. In recent years the banks have interfered with these contracts by withdrawing money from circulation and thereby increasing the value of money, lowering- prices, and increasing tlhe already unbearable burden of national and private debts. As an antidote to the deflationary process which has been forced upon New Zealand, 1 consider that after taking over the sole power of issuing notes, and using these in payment notes, the Government should artificially inflate the currency by printing notes and issuing these in payment of standard wages to the unemployed who could be placed in productive employment. If would not be necessary to impose a wages tax, as the notes, would be made irredeemable. It is admitted that inflation in New Zealand would not alleviate the burden of external dj?bts which were not contracted in New Zealand currency. So far as these

are concerned, there would be no alteration. Thr process of inflation could be con. tinu’ed until the prices obtained overseas for our products would (in New Zealand currency) roughly equal the prices ruling, say, during the years 1926-1928 and our internal purchasing power would be restored. Thp dead weight of fixed charges would be immediately lessened and the farmer, so far as payment of interest is concerned, would. b.“ placed on a more equitable footing. Prices of imported goods would of course be increased by the raising of the exchange rare against us, but this would have the desirable effect of stimulating our secondary industries and our generally. The placing of all the unemployed in productive work would enhance the total wealth of the Dominion and in place of. the army of workloss a great productive force would be created. All we have to do is put theory into practice and substitute for our old and effete monetary system that has outlived its period of usefulness, something that is mor.e in accordance with modern needs and conditions. I am. etc., ANTI-DEFLATION.