CORRESPONDENCE

Grey River Argus, 3 May 1932, Page 8

CORRESPONDENCE

THE CURRENCY PROBLEM.

(To the Editor).. Sir, —It is refreshing and inspiring to read the letter of “Anti Deflation” in your issue of the 27th inst. We have heard a good deal of late about the theory of inflation and deflation, but your correspondent has come to the point in the matter. There cannot be any doubt but that the present depression is caused by the banks monopolising the credit of the country and restricting the use of same, their object being to keep up interest rates and pay big dividends. I disagree with your correspondent that anything like a large note issue should be made. There is not the slightest necessity for enlarging the preesnt note issue to any great extent, as at the present time the total note issue on which the business of the country is carried on, is only about £6,255,717, and this amount is lower than eleven years ago by no less amount than £1,313,002, showing that it has not been necessary to have a large note issue as suggested by your correspondent. The solution as suggested by “Anti Deflation,” is to establish a State Bank with the sole right of note issue, to enable the State to control credit, and use the same in the interests of the whole of the people. This would mean that enterprise would be stimulated and the unemployed bogey would soon disappear. Surely statesmanship consists in something more than taxing and borrowing, of which we have had enough. The banks use the credit of the nation to make high profits, and if the State requires the use of credit which the whole of the people have established, they have, under the present circumstances, 1 to borrow credit from the institutions who have made a corner in credit, and to pay interest thereon. Of course, it goes without saying, that the State will only issue the currency on security, i.e., upon land, and labour products. There would be no issue, say, for unemployment, unless the labour of the unemployed was used to produce security for the credit issued by the State Bank. Under this system the unemployed would soon disappear, as with the country’s credit set free, production would increase by leaps and bounds, mainly from the land; and this would stimulate production in our secondary industries.

Of course, when anything like this is advocated, the stereotyped parrot cry will be raised about inflation, and about the State paper slumping in value; but I would point out that in times of stress even nations have had to use and issue credit notes to carry on, which they did satisfactorily. I refer to the French Revolution, the Civil War, and the War of Independence in America, and even in the Great War the British Government made the bank paper legal tender; and they could not have carried on otherwise. The bank notes issued by the Banks in New Zealand are legal tender by Act of Parliament, and will bo until 1935 under existing law. The State Treasury is responsible in case of default by a Bank under this law. The State could also have a monopoly of gold in reserve if required, compelling all the gold produced to be sold to the State at full market value. The State has assisted private banks in this respect (see page 584, Year Book 1932). All our liabilities abroad have to be met with payments in real wealth, i.e., products of labour from land, etc. We certainly require statesmanship to get us out of the slough of despond in which we are at present; but there is no hope with Forbes and Co at the helm. Bluffing and bludgeoning will not do any good; repression and tyranny have been tried before, but always proved a failure. History will repeat itself in New Zealand before very long. We want peace and goodwill, and the only way to achieve this consummation is by statesmanship to raise the standard of life, which can be done to the advantage of all. The people will resent the indignity cast on the aged poor, who in most instances are the pioneers, and on the dependents of dead soldiers and others. This foul blot on our escutcheon must, and will, be removed when the injured people next cast their votes, which we' trust will be in the near future. We have politicians prating about law and order, but when it comes to the legal rights of workers under awards or agreements, they annul same without the slightest compunction. Thanking you in anticipation.—l am, etc., OBSERVER.