“NO MONETARY CRANKS”

Hauraki Plains Gazette, Volume 51, Issue 3151, 3 August 1942, Page 5

“NO MONETARY CRANKS”

(To the Editor.) Sir,—J have little spare time for newspaper correspondence but I must correct at least one statement made by “A-E.H.” under the above heading in your edition of July 27. Referring to the loan of £17,000,0i00 which fell due for repayment in London in 1939 your correspondent says that “Montagu Norman told Mr Nash that the best he could do was to spread payment over five years and we had to find the cash,” etc.

Now what was the position? The expiry date of the loan was reached and the money had to be repaid. At this point New Zealand was' simply not in a position to pay owing partly to the fact that its exchange funds in London during the two to three months immediately before and after the 1938 elections had been raided by financial interests in the Dominion who wished to confront the Labour Government with ,a Crisis. Therefore, New Zealand, was’•faced .with one of two alternatives: either to repudiate or negotiate for a postponement of thejrepayment.

\ As repudiation is a dishonest policy (and incidentally repudiation'can easily be met with the most unpleasant forms of retaliation), Mr Nash had to work for postponement and he succeeded. Despite the allegations of his critics 1 that the terms which governed the postponement harsh and impossible and would prove ruinous to New Zealand, they have been scrupulously observed without a solitary New Zealander losing a wink of sleep or suffering the slightest real inconvenience. I may add that when the history of this episode can be written it will be seen that Mr Montagu Norman, instead of dictating to, or “telling” Mr Nash, was one of the very few helpful persons with whom our Minister had to negotiate on that occasion..

The reference by “A.EH.” to the use of the Reserve ißank by the Government to finance a number of public activities is quite correct. But this is socialist, as distinct from “monetary crank,” finance. It would, however, be a gross mistake if because the Reserve Bank can safely finance the construction of State houses when labour and materials are available, it were argued that the bank, at a time when existing spending power is vastly in excess of what is ..required for the purchase of a declining quantity of goods, could advance limitless credits for, say, the of the war. Obviously, this wwild be the wildest inflation, but notwithstanding this, “monetary cranks” do make this proposal and they are none the less “monetary cranks” despite their disbelief in gold as a basis for our financial system.— I am, etc.,

JAMES THORN. House of Representatives, 30/7/42.