EXCHANGE RATE RISE

Hawera Star, Volume LII, 31 January 1933, Page 7

EXCHANGE RATE RISE

PROFESSOR’S CRITICAL VIEW ARTIFICIAL INFLATON ■SUGGESTION OF SALES TAX. INCIDENCE OF REVENUE. (By Telegraph—Press Association.) WELLINGTON, Jan. 31. ■ : In the course of a reply to question's in which he was asked to express an opinion in regard to the exchange issue Professor B. E. Murphy says: ‘ ‘lf other things remained equal an exchange inflation policy would neither increase nor decrease the real national income, but would redistribute it in favour of the rural section of the community and its creditors as against the rest of the people. If the redistribution involved, exercised favourable reactions, psychological and otherwise, on business enterprise and I confidence, a rise in the real national income over the level at which it would would otherwise have stood would be effected. If, however, the effect of the policy is to lessen confidence and dim-; inish enterprise, then the result would he a fall in the real national income. I “In my view an inflation policy will; probably, but not Certainly,' exercise a prejudicial effect.” He says'also: “It is fallacious to assume that the total addition to the national income is equivalent to the increased taxable* capacity. Some- increase in taxable and rateable capacity there would undoubtedly be, but there is no evidence that the whole of the exchange bonus will be available for this purpose. Much of it will be scattered over thou-i sands of incomes, which will be below the exemption limit for direct taxation and if there is any. other feasible form ‘of tax that will' tax it at will the inflationists have not disclosed it. “A sales tax would, apart' from other objections to such a vicious and unsound impost, miss the exchange bonus and strike with main severity on the incomes of those at whose expense the bonus is being provided. “This iis shifting _ the burden of past rural speculation, which is the real root of our troubles, on to the shoulders of the rest of the community. Any gain in taxable, capacity would he to some, degree set off by a' reduced taxable capacity in other directions.” He thought a. rise in the cost of lining was inevitable. In fact, it seemed an integral part of the policy. Professor Murphy lays down three basic principles. He says, firstly, that the Government control of the supply and or the value of money and credit to secure general social objectives is a. dangerous policy, for which adequate guiding precedents db not exist and which is fundamentally incompatible with the system of private business' enterprise on which we rely and for which at the present there is no praC-i tical substitute. Secondly, competitive exchange depreciation hv primary producing conntries must lower sterling values and world prices, but it is only from a rise in world and sterling prices we can. expect any real national economic relief. Thirdly, a. policy of monetary inflation, coupled with unbalanced budgets involving the creation of a floating public debt- of indefinite dimensions, is likely, if persisted in, to lead to national bankruptcy.