"THE TRUTH ABOUT THE SLUMP."

Horowhenua Chronicle, 9 October 1931, Page 6

"THE TRUTH ABOUT THE SLUMP."

MUCH DISCUSSED BOOK. A CRITICAL REVIEW. (By Professor A. H. Tocker in the "N.Z. Financial Times.") This book, published by the author,, is reputed to be the best seller of the year. It deals with a subject of universal and topical interest; its author is an experienced journalist and a facile and vivid writer; and its matter is distinctly sensational. The writer has displayed much energy in assembling material from an extraordinary variety of sources—and a variety of extraordinary sources —and in fitting that material into a coherent story. The references, which include "The Affair of the Diamond Necklace" (which preceded the French Revolution), "The Protocols of the Learned Elders of Zion," "Dialogues in Hell," and "The Black Book" mentioned in the Maud Allan-Pember-ton Billing libel action about 1920, appear to touch upon most of the public mysteries and scandals of the last century or so, and they whet the appetite for more. At the same time, the reader is inclined to rub his eyes in wonder whether he is reading a serious contribution to the solution of present economic difficulties or the latest thriller in detective fiction bought from the railway bookstall. As a whole, the book recalls Lipmann, the American psychologist ("Public Opinion," page 129), "And if you go stark, staring mad looking for plots, you see all strikes, the Plumb plan, Irish rebellion, Mohammedan unrest, the restoration of King Constantine, the League pi Nations, Mexican disorder, the movement to reduce armaments, Sunday movies, short skirts, eva-sion of the liquor laws, Negro self-assertion, as sub-plots under some grandiose plot engineered either by Moscow, Rome, the Free-masons, the Japanese, or the Elders of Zion." Mr, Field includes both Free-masons and the Elders of Zion; but he goes further and claims that the present world-wide slump is the direct result of the plotting of an international ring of German Jews, who were also directly responsible for the Great War and the Russian Revolution, and who seemed to have had something to do with the French Revolution of more than a century ago. One rather wonders what they were doing between, say, 1815 and 1914.

The book, however, reveals in places a strange lack of understanding of the simplest elements of the subject discussed. For instance, on page 107-8 reference is made to Sir Otto Niemeyer's statement to the Imperial Economic Conference of 1923, that the New (Zealand exchange would right itself when the gold standard was resumed. The author comments: "We know how incorrect that has proved." Apparently he is unaware that ISTew Zealand"has not yet resumed the gold standard.

It is a little difficult, too, to associate the remedies suggested in the book with the causes laid down for the slump. The remedy suggested for New Zealand is said to be Irving Fisher's scheme for stabilising the value of money. "All that is needed is for the Government to decree that henceforth the .gold content of the New Zealand £ shall vary according to the movements of the export price index compiled by the Government statistician, taking, say, the 1925 index figure as par." A comparison of index numbers of prices shows that, if this were done, exporters might now be getting in New Zealand the same average prices as in 1925, but importers would be paying about 68 per cent, more in New Zealand money to meet a given bill for imports, and the New Zealand taxpayer would have to find £l3| millions in New Zealand, where he now has to find about £B. millions to pay interest on public debt due overseas.

The scheme suggested does not appear to ~be even Irving Fisher's scheme, which is usually regarded as aiming at stablising the purchasing power of money within a country, and as being based on index numbers of wholesale prices rather than of export prices.

But the same basic fallacy is involved in both schemes, and has been pointed out recently by Mr. J. M. Keynes in his "Treatise on Money." The stabilisation of purchasing power is perhaps the most desirable and important of all economic reforms, but the idea of the purchasing power of money must include the whole of the items on which money is spent. These include wages and salaries, rents, land and houses, stocks, shares and capital goods, as well as items listed in wholesale and retail price indexes. There is no index number anywhere which would provide an adequate basis for stabilising purchasing power in this larger sense, nor is there sufficient information to build such an index number.

Irving Fisher's scheme was first proposed about 1911. There has been much monetary turmoil and change since then and much earnest seeking by many different countries and many individuals for improved forms of monetary control. No country has at- j tempted to. adopt the Fisher scheme, and there is little evidence that it has ever been seriously considered as a practical proposition anywhere. Such interest as it has aroused has been almost entirely academic. Again, during the last two years, prices have fallen heavily in nearly all countries. There is, however, practically no evidence that that fall in prices was associated with deflation, and very much evidence that the fall occurred' an spite of the maintenance of the volume of money, and ~ for reasons largely unconnected with banking. The" degree of control exercised by banks over the general price level is, therefore, very limited indeed, and thfr bankers' : . interest -is always in the maintenance of stable or rising prices, not in deflation and falling: prices> : For; the banker, with his fixed obligation' to r pay. back /his- • depositors-' mbiie'y," pjays his, .expenses and. makes -Ins| cprO--fits,.mainiy.;by lending that money jiipx*n s/pjeuriLty, and he may. .be the ifitfsi :s'afl& heaviest laser ; sh.auld : the. securities?;-©'n;

which he has lent his depositors' money depreciate in value. "The Truth About the Slump" is a fascinating book, which few who take it up will wish to leave unfinished. But it can hardly be held to tell the whole of the truth. What it. omits, in fact, is many times more important than what it says. LOOK ? ? for £1 19. TN financial times like these, you need the "N.Z. Financial Times" —New Zealand's 48-page financial monthly. Half our farmers are insolvent. Business failures are in every town. You know that' over 50,000 people are without work, and yet there are people making money every day. 95 out of 100 .make money before -they-are 35. Only 5 out of 100. have :a'r?y money whe-ii they are 65. There is no, sin but : ignorance. .Join, the <•'Money Keepers" to-day and insure ...-your financial welfare by seeing .that," c .you ,' '-Keep up Avith the / Financffti V, ,; '•■' "'■ QpXt'■J>Jy?>:.gP* n $ a ' per annum, postage free?" *. .\ (;.:,••.;• - '. ' ..,-, your stationer, or %rlteP' : d'i-ie^t.>tp^'';.:'>v l f. ' •'; -. •- ■'■ ; ''• :: \ '?•'•'•''' -:;'X/ '■{ .Wellington/-,■■*s r.'; ,