MONETARY REFORM

Nelson Evening Mail, Volume LXVI, 22 July 1935, Page 9

MONETARY REFORM

(To the Editor)

Sir, —In your issue of Saturday, the 13th, “Pertinax” makes some astound-, ing remarks which, would be amusing were it not evident that lie takes himself seriously. Because the number of employed persons has increased in Britain he considers that Britain has weathered the storm. Frofn 1921 to 1932 the number of employed increased by a round million yet the number employed on the purely productive side of industry remained almost stationary. Practically the whole of the increase was in the"distributive occupations. The selling of goods required more effort than the making. Why? ,Because the loss of purchasing power, through the flaw in iho monetary system, by which money is withdrawn faster in prices than it is issued in costs, compelled that million to fight for a place in that diminishing purchasing power. The result was a still further lowering of purchasing power for all those in employment, either by reduced wages or increased taxes and prices. That we should get down on our bended knees and thank ouv banking system for keeping us from barbarism is ludicrous in the extreme. Science and industry, the cultural heritage of this age, and the unearned increment of association, have brought us away from the necessity of barbarism, the cult of the tooth and the claw, yet in an age when the world was never richer in the material things to supply the utmost needs of mankind, physical poverty was never greater. The monetary policy imposed by the banking system is responsible for the frustration of man’s desires because it lias been allowed to dictate to governments. It is an insult to the intelligence of our representatives in Parliament and of the people who sent them there to suggest that the banking system must be free from the fear and the fact of political control. Judged by results, the present control lias not proved very happy and we are saved from a relapse into barbarism only by ouv innate patience and willingness to suffer because we do not all, understand the reason. The present increased employment in Britain, which is hailed as a sign of returning prosperity, is due to increased activities in armament making. If anything it is a sign that the present policy of the hanking system is more likely to lead the world backwards to a barbarism which wjll he more brutal than any in his-

tory. lo the banker, the satisfactory conditions of industry at any time are those which make the banking system work most smoothly. If it cannot be made to work smoothly, it must be made to work, even though in the process every other interest is sacrificed. The soundness of the banking system may be some satisfaction to “Pertinax,” but jf he is a bank shareholder his satisfaction will not amount to much when he surveys the ruin of all his other investments and reflects that they have been sacrificed needlessly. Since 1920, the policy pursued in Britain under the Jeadership of the Bank of England has been continuously restrictive, that is to say, directed to the reduction of the amount of money to back orders. This policy has been termed “deflationary” but it is open to considerable doubt whether the term is justified. It can be applied correctly to a situation in which prices and money are decreased in such a manner that the'purchasing power of the unit of money rises in the same proportion that its* total quantity is decreased. This condition has not been fulfilled, as the' amount of money in the hands of the public has been decreased by taxation and by other methods at a much greater rate than prices have fallen. While the upper limit of prices follows approximately the quantity ox theory of money, the lower limit is governed by cost o‘f production. The result has been to restrict production, to force down the price of real property and to enrich money lenders at the expense of the individual and the producer. Since for every seller there must be a buyer, the situation which has been created by the numerous and increasing number of bankruptcies and forced sales merits some attention. The momentum of ' business induces business undertakings to carry on to a point considerably beyond that justified by their unmortgaged liquid resources, even assuming that their transactions have been financed normally in this way. As a result of this, and as indeed might be expected from the control over the money system acquired by the banking institutions, it is probably true to say that in Great Britain, 90 per cent, of trade and business has virtually* come into the possession or control of banking interests. Such a tremendous transfer of ownership has probably _ never occurred in recorded history. What is true of Britain is probably true of. New Zealand. There is no suggestion here that bankers, as human beings, are in the main actuated by any, anti-social policy. The system is such that the results are simply inevitable. The banker in himself lias not, in general, any technical knowledge outside the routine of banking. It is on recoid that on two notable occasions the heads of large banking institutions, one in Canada (Sir Frederick Williams-Taylor of the Bank of Montreal) and the other m England (Mr Montague Norman of the Bank of England) have replied to questions regarding the results to be expected from current banking policy in almost identical terms, to the effect that they were bankers, not economists, a contention which, viewed in the light of events., seems to be true. The issue today is first who is to control monetary policy and second to what end is it to L controlled. I am, etc., BR^y> Christchurch, 18th July.

(To the Editor)

Sir,—A Nelson friend often sends me a copv of “The Mail” and in the issue of Bth July appears columns of correspondence ‘on the subject of Douglas Credit and honestly I never read such piffle. Those against it had to make it so, because when one has to answer piffle one can only answer in the same strains. I thought Tauianga was the only stronghold on this subject and though we are trying to beat Nelson for sunshine record we certainly cannot beat them on this worn out impossible subject. They even o-ot Mr Atm ore up here to speak on it, but I can find dozens of people who six months ago supported it, who now can see nothing in it and it is dying a natural death. The Hon. Downie Stewart stated that the gulf was too great to adopt it. The editor of the “Bay of Plenty Times” got so full up with it that he prohibited any further letters. The Auckland “Herald” a year ago used to have lcttcis daily. Now you never see the subject mentioned. Further .1 read thiec leading English papers and I have never yet seen the words “Douglas Credit” mentioned but British brains have more sense than to waste time on impossible propositions. Then about a yeai ago it was stated at Douglas Credit meetings here that proposals had the support of the London Chamber of Commerce. I sent a copy of the paper to the secretary and asked him what truth there was in it. I had a kind reply and one paragraph states: “We have never even discussed Douglas Credit, therefore we have never expressed an opinion on it.” Next report Was that Major Douglas had been sent for by the Alberta Government to establish it there aiTd shortly after it

was in the papers that they would have nothing to do with it. I doubt it you could find a business man in New Zealand who would support it. Here, a majority of men who are unsuccessful in business, farmers who are disgruntled because they have not ability to make a success and want help from fictitious money, and farm hands who could not even keep a ledger correctly. 1 prophesy that in two years or less the subject will be dead—l am etc. TAUBANGA. Tauranga, 18th July. (To the Editor) Sir, —Now that our local newspaper war is dying down, and the smoke is clearing away, it is becoming easier to distinguish the shape of tilings. At first, with the rank and file hurling gas, smoke, and stink bombs around, it was hard to know what the leaders were driving at. It appears now that after all this war, like most others, has been fought through a misunderstanding. We had a presentation of the Honglas system the other night; now ‘'Gamma” lias followed with the details of the London scheme, and if my reading of flic, letters is correct Lhe position is something like this. A. The Douglas plan suggests that the State issue tickets (money) to the total amount necessary for us to purchase all goods offered for sale. The London scheme “ensures that tiie amount of credit and currency to be made available shall be proportionate to the degree of business activity. Thus the “supply of currency would always expand and contract with the needs oi the community.” B. The Douglas scheme lias a provision for fixing what they call a just price for commodities. The London scheme ensures that the general price level shall remain approximately stationary. C. The Douglas scheme would alter the amount of money in circulation as required to effect demand A. and B. The London scheme provides machinery (Central Banks) whereby any tendency to inflation or deflation can be stopped. The main difference between the schemes, although this has never been mentioned, is perhaps that the Douglas tickets would, I presume, not be interest bearing, and the Loudon ones would. If so we can sum up something like this.

1. The Douglas system is (lie same as the London system minus its best or worst feature (according to which side of the fence you are on). 2. The London system is the same as the Douglas system plus a good (or bad) feature of the former (according to which side of you the fence is on). — I am, etc., DISINTERESTED. Nelson, 19th July. (To the Editor)

Sir, —The blunt declaration made by “Common Sense,’’ “I refuse to accept the reports,” is just typical of your true Douglasitc. No religious bigot clings more tenaciously to his tenets in the face of the . plainest evidence than does your social credit man. If the facts will not fit in with his theory, sq much the worse for the facts. Similarly “Jean,” who was evidently convinced against her will, recently declared: “Further argument is useless so far as I am concerned,” and "Henna Mali,” sharing her irrational attitude, praised her for her “staunchness.” Now it is the turn of “G.S.” Confronted with a cablegram from Alberta and also with a fairly detailed report from the correspondent of a highly reputable paper, the Wellington “Evening Post” (both of which will be considered quite sufficiently reliable sources of information by the great majority of your readers), “Common Sense” attempts to extricate himself from his impossible position by simply asserting, “I refuse to accept the reports.” When in the course of a few' days or weeks we get complete confirmation of these same reports from the American and English papers, “C.S.” will no doubt still refuse to believe and will assure us that the papers are of course subject to the machinations of that wicked Bank of England.

Yet why should “Common Sense” be so reluctant to believe that Major Douglas put forth such mad proposals for the salvation of Alberta? After all they are scarcely more preposterous than those which he propounded for Scotland or those which he laid before the New Zealand Monetary Committee in February of last year. I have before me the verbatim report of his evidence given to the committee and it makes astonishing reading. Let it he remembered that he proposed to take, first from the banks and the insurance companies and afterwards from all other business concerns, a large part of the reserves .upon which they absolutely depend for their stability. As the committee pointed out, this would lead to the greatest financial crash imaginable. But to whom did the Major propose to transfer this looted wealth? Not to the poor and needy as one would expect but to all those fortunate people who had overdrafts at the banks. Now it is not your down and outs to whom the banks grant advances. It is people who have good solid assets which they can hand in as security for their overdrafts. “To those who have shall be given” by tile Major. Moreover it is obvious that if you merely pay off a man’s overdraft from the bank's reserves, you do not increase his purchasing power unless the bank is obliging and foolish enough to let him run up another overdraft, a most unliKcly contingency. But indeed the more the proposals made bv Major Douglas for New Zealand are examined, the more laughable do they appear. Why do Mr Atmore and “Common Sense” never advocate these measures? At any rate “C.S.” has no grounds for disbelieving the report about the Alberta suggestions in view of the equally ridiculous proposals Major Douglas made for New Zealand.

“Common Sense” is good enough to approve to a large extent of the scheme of monetary reform put forward by the London Chamber of Commerce but complains tlint it will not cure all our troubles. Of course it will not any more than any one medicine will cure all our ailments from baldness to housemaid’s knees. Our present depression is due only in part to our faulty monetary system and no reform of that system will by itself effect a complete cure. We do indeed need an increase in our purchasing power, hut a distribution of Douglas dividends would speedily annihilate what purchasing power we still possess. Let butter prices advance by another 3d and wool by another fid and we shall all soon he rejoicing in plenty of purchasing power, Mr Coates’s recent meat agreement will by itself distribute some hundreds of thousands of

1 pounds throughout the country. That is the kind of purchasing power wi need, not showers of Douglas pa pci money.

I There are indeed, as “C.S.” states. | A'ital differences between iiis views and i mine. Tlie dill'erenee between ns is all i the dill'erenee between two doctors, i both of whom agree that the patient • is ill, but one of whom recommends as . medicine a draught which is denounced • as rank poison by all other professional men and is known to have killed many other patients previously, while the other doctor prescribes a medicine that is warmly approved by other medical j men of the highest standing. It cannot be too strongly emphasised that the Douglas nostrum lias the backing of not a single eminent economist and not a single Labour party. If that fact alone is not enough to condemn it utterly in the eyes of all sensible people, I should like to know what is? —T am, etc., GAMMA. Nelson, 20th duly. (To the Editor) Sir, —‘'(lamina” seems determined not to let me thoroughly dislike him. Though he biles savagely into the flesh of “Common Sense,” he seems inclined at times to stroke “Ikona Mali.” First, ho apologises regarding the hot potatoes. Now he pays me the compliment of admitting my letters contain wit and humour. He adds, however, that they contain no argument, and arches my back again. Ye gods! no argument, and we had several seizures of writer's cram]) arguing with him. My one aim has been to get him to think; and I only make him laugh. He looks on me as the funy man in our play, and not as one of the actors. All I’m supposed to do is to conic and make a few “wise-cracks” to keep the audience awake. “Gamma” is never too sure about anything, and this may prove another of iiis delusions. Let me quote! Within the muddy, slimy pool, The star's reflection glows: The poet's song, within some fool; May wake a soul—who knows?

Even ‘‘Farmer Brown” may take fresh heart of grace from the above. Well, if I am the comedian of the party, “Oamma” is certainly the villain. I always feel sorry for the stage villain. He never has the audience with him, and he is doomed to have all his plots frustrated before the curtain falls, and the good honest hero has come into his rightful inheritance. All that is left for the villain is the credit he can claim for his acting. Per-

sfinally I have not a vorv groat opinion of “Gamma’s” histrionic abilities. Xow to onr muttons! “(lamina” says there are one or two points in my letter with which he would like to deal. This looks as if he were asking for still another fresh pack of cards, and it is becoming quite a stunt of his to hold up the game. T am putting the cards into suits again, to stay “put.'-’ “Gamma” says: “I asked ‘Jkona -Mali’ why pay.uient of money by a grocer to a merchant should block the circulation of money, any more than payment by the grocer to the butcher. He makes the amazing reply that 1 should have had enough sense to see that he was referring to overheads, a totally diferr cut thing. But it makes no difference, and I have not the slightest objection to his substituting overheads, in place of the merchant.” Your readers. Sir. will not be able to make much sense out of the above. So 1 will explain what it is briefly. “Bull’s wool!” Substituting, forsooth! T entered the debate where “Jean” left off, and in my first letter, T said: “The grocer does not trot into the butcher with 'his pound. He hoards up the various pounds for a period, and uses a portion of each of these pounds to pay his staff, his rent, etc.” Yet at this late date “Ganuna” says T am substituting overheads! “For overheads” (he goes on to say) “consist of such things as rent paid to the landlord,” one of the very items I had quoted. Later 1 told “Gamma” 1 thought he would have enough vision to follow the £, once I had pointed the way. Thus, there is nothing' amazing in suggesting he was lacking in sense. The fact is, I think “Gamma” is trying to hit too many: balls at once, any single one of which can beat him. “Gamma” also asks me further, why the landlord should block the circulation. There is no answer, because these points never arose in my letter. Readers who took any interest in the Christmas tree argument will remember the £ was never blocked. To use “Gamma’s” famous slogan, it went “on, and bn, and on.” Why has, he ignored those journeyings? Why has lie ignored all the other points of argument? Because they are unpalatable. “Gamma” wanted to hear from me again before I quite “fade out.” Already he has forgotten I am only the clown in this circus! It is only film stars who fade out ! Well, 1 am here to complete our argument about the Christmas tree, and to prove “Jean” right when she said goods andi money must equate. My children at the party were happy and contented. They all had a ticket. At “Gamma’s” party we find the guests came away £495 to the bad. At his world’s fair,” we saw prosperity in the shape of ninety-nine stallholders serving one customer. My cheque for £3, made payable to “Gamma,” or order, with which he is to put one thousand people into business and work, that will prove profitable, is still without my signature. If there was anything at all in “Gamma’s” argument, he owes it to his fellows who want work to draw on my capital. I have to tender by warm thanks to “Ticketless” for pointing out to “Gamma” the need for him to prove his theories. Here is one lad, who has on ticket and “Ticketless” wants “Gamma” to start the works, so that the lad can get his present, even though he has no ticket. This lad is anxious to work for a widowed mother. F. am battling for him, and the many thousands of lads, fixed as he is. The appeal of “Ticketless” has encouraged me to continue battling, for 1 realise that “The song within some fool—may wake a soul.” Mark it well. My “fooling” has not been entirely in vain. -Mv fervent wish to this lad and his widowed mother, for the coming festive season, is this: “A Merry Christmas!” and may I add, “it’s on the cards.”

T am not asking “Gamma” to start his famous works, but only to run it. T can find him plenty of butchers, bakers, and candle-stick makers, who will bring along their Christmas trees in the manner suggested by himself, all loaded up with goods, providing he gives a guarantee, once my liver is put in circulation, he keeps them prosperous, and assures them they will not have to go out into the cold world to try and buy £SOO worth of goods with that same fiver, should “Gamma”

suddenly find out lie was wrong. The scheme is entirely “Gamma's” own. As “Common Sense” would say, “Now ‘Gamma,’ it's up to you!” If you can’t put into practice what you preach, for heaven’s sake get out ot the pulpit. “Gamma” wrongly accuses “Common Sense” of “tilting at windmills.” Even this occupation looks to have more attractions than titling at windhags. What 1 might he pardoned for calling “the Christmas tree trial." is ended. The ease between Statistics Unlunited (Mr “Gamma" representing) and Truth, Logic and Company (“Ikona Mali”) is closed. “Jean” brought to court an honest claim. “Gamma” with his wierd cross-examining would have had her withdraw the claim. Tt has been my self-imposed task to substantiate it. “Gamma’s" only reply is. jJ have no arguments. I have exposed his “exchange and mart.” I have wrecked his “world’s fair.” His only reply has been one or two stupid questions. ; Ladies and gentlemen of the jury, consider vour verdict.—l am. etc., JKU-wi MALT. Nelson, 22nd July.