Finding a Job for Surplus Spending Power

Manawatu Times, Volume 69, Issue 206, 31 August 1944, Page 4

Finding a Job for Surplus Spending Power

IMPORTANT FUNCTION OF WAR FINANCE When speaking at Feilding on. Tuesday night, Mr. W. R. Eggers, Chief Accountant of the Reserve Bank, who at present is in tho Manawatu district in connection with the Victory Loan, drew attention to a new phase of War Finance —that is the effect which the expenditure of huge sums of money for war supplies has on ihe general economy of the country. Mr. Eggers pointed out that whereas in December 1939 the money in circulation, i.e., the spending power of the people, was £62,000,000, by December 1943 it had increased to £137,000,000, a difference of £75,000,000. During the same period the supply of civilian goods and services decreased. Mr. Eggers suggested that this surplus spending power in the hands of the people was a source of potential danger to tho whole price structure and this he demonstrated in a novel way. “If,” he said, “we visualised a set of ordinary balance scales with the tray on one side containing all the money in circulation and the tray on the other side all tho civilian goods and services which can be exchanged with that money, and the trayß then balance, we have a balanced money and price structure.

“What has been happening in New Zealand is that we have been adding to the money in circulation but not to the goods and services. As a result our scales do not balance, but we have by means of price-fixing regulations held the prices of most of the essential goods and services. To ease the weight on the money side of our scales we should take steps to withdraw some for other purposes. In other words, wo must find work to do for a large part of that £75,000,000. “We now have the opportunity to do this. Let us therefore take from our pockets, from our balances with the banks, the £40,000,000 required for the Victory Loan. We will still have plenty left for trade and business purposes. We will be basing the strain on our price structure and, what is most important of all, we will be providing the money to buy the supplies needed for our fighting services.”