MONETARY REFORM

Nelson Evening Mail, Volume LXVI, 23 July 1935, Page 2

MONETARY REFORM

(To the Editor) Sir, —The London “Observer” of 9th June prints extracts from what it published a hundred years ago, and j the following inay interest your read- j ers as showing tiic ill effects of trea t-! ing “an exuberance of money” even; in those days:— | “The late panic in the Slock Lx- • change was brought about by a com-1 bination of causes. In the first place,! the Bank of England created an . exuberance of money, and this led to a ! great avidity on the part of the pub- j lie to invest in all securities yielding i a high rate of interest. The purchases ; were made to a vast amount by specu- j hitors on borrowed money, and prices ! were consequently carried up to an • unnatural pitch; when some of the; great holders of the securities began' to realise, the market could not with- j stand them, and the panic, as a con- J sequence, ensued.” | I think it was in 1721 that the'. Eoutli Sea bubble "burst and spread ruin around, and so it has been ever since at regular intervals. The recent smash in .America has I suppose exceeded any other in magnitude showinghow human nature does not change in spite of all our warnings. 1 was in Canada in 1912 during a land boom that would be unbelievable to any one who had not experienced it.. Everybody went mad for the time being. Property increased tenfold in value in as many months. I, myself, bought an acre of hand three miles outside Victoria for 2.000 dollars* ( £400), and -sold it for 4,f>00 dollars within a few months. 1 don’t suppose it is now worth 500 dollars. Another section of land 1 bought for 0(1(1 dollars I sold for 100(1 within a few weeks. The buyer paid oncthird in cash, but failed to complete, and the section eventually came back on my hands. I tried to sell it during the next twenty-three years, and after paying at least .'IOO dollars in rates and taxes, was very glad to accept 100 dollars for it some six months a<m. These transactions were mild compared with others I knew of at lliw time. This boom ruined the country for the time being and it has not got over it yet. There was a land boom in Australia in 1892 that smashed all but three of the banks, and ruined thousands and j thousands. When I went out there ten years later, even near Brisbane, land was in many cases valueless. Fortunately, we have not experienced this sort of thing in New Zealand so far, and if we keep our heads and don’t play the fool with untried experiments in Social Credit as Mr Atmore would have us do, there is no reason why we should. There will be time enough when success has attended the experiment elsewhere. The gold standard is much abused, and it is significant that America is hoarding silver as an additional backing for her paper money. The following is also from the same i “Observer” in a review of a recent book called, “Our Own Time 1913-1934. A Political and Economical Survey,” bv Stephen King-Hall: * “The beauty of the gold standard system as it was worked by London in the. opening years of the twentieth century was that it permitted bankers, merchants, and industrialists all over the world to hold economic hands under the table whilst leaving them free to scowl at each other in the accepted national manner when political exigencies demanded such patriotic grimaces.” Necessity is still the mother of invention, and improvements and reforms will evolve as required. In the meantime there is no reason why we should b c stampeded into wliat has proved a veritable quagmire of disaster, in every case so far tried, of reme- j dies that lead to inflation. I should like to see Captain Mon- 1 crieff's letter printed in every paper in New Zealand, so excellent did it appear to me.—l am etc. H. G. FOSTER BARHAM. Nelson, 22nd July. (To the Editor) Sir, —The New Zealand Welfare League is again busy putting out smoke screens to obscure the issue. This time it tells us that the national credit has always been made use of by the people. Such is mere sophistry. The people, through their Governments, Liberal, Reform and Coalition, have mortgaged the national credit bv borrowing from the banks that which really belonged to themselves as a State. They borrowed money created by the banks on the security of the national credit. This money had no previous existence but the State could have brought it into existence as easily as the banks did and could have used it n”d cancelled it without the necessity of paying interest on it for ever. Every asset created would have been a real ' asset , free of debt whereas to-day it is represented by debt and cannot be used freely because we cannot secure the money to pay the interest. At the end of a year a £IOO loan represents £lO5 of debt and it is impossible to pay £lO5 with £IOO. The interest may be paid but after 20 years there is nothing left to pay interest with. Governments have eventually to borrow to nay interest. A ioan of £5,000,000 ill 1879 is now represented by £7,000,000 in our national debt. ‘The classical example of the proper use of the national credit is that of Guernsey Isle. At the end of the Napoleonic wars conditions in. Guernsey were deporable, both financially and physically. There were iio banking facilities’and the currency consisted of badly worn French and English coins. In order to finance sorely needed public works, the local Parliament, called “The States,” authorised in 1815 the issue of £4OOO in notes—promises to pay on demand one pound value received. By 1830 £BO,OOO had been issued but £25,000 had meanwhile been cancelled. New sea-walls, piers, schools, a college, a market, house, 68 miles of country roads built, two streets in the town widened, paved and sewered, houses demolished and new ones built, were tile result of this method of Not a penny of interest was paid. Everyone was prosperous. By 1830 two banks had become established and commenced issuing notes. On 22nd September 1836 the States decided to resist circulation of'the banks’ notes but history is silent as to what took place between that date and 9th October 1836, when the governor signed an agreement with the banks to withdraw £15,000 of notes in return for a bank loan at 3 per cent. The States notes were not to exceed £40.000 in future. Notes up to that amount have since remained in circula-

tion at no cost of interest but'it is interesting to note that, the States lias since then paid the banks £45,000 in interest and still owes the original £15,000. That was good business for the banks at the cost of printing notes but bad business for the States which parted with that part of tile public credit for a mess of pottage. The public credit is founded on real credit which is a. correct, estimate of the ability of the community to deliver goods' and services. Financial credit is a. correct estimate of their ability to deliver money. Applied to a state it means taxable capacity. it may be argued that the Guernsey operation was a forced loan without 'interest but it hardly requires argument that the forced loan was very profitable. All luxation is a forced Joan but when it is taken by the people from themselves to lie spent by themselves for their own benefit and" yields the benefits planned : for, there is no filing in (lie phrase i '‘forced loan.”

[f both methods, that by taxation, Syndicating of bankers and contractors, and that by the issue of money for services and popular self-direction, arc both .forced loans, it is evident that the one ■kind is infinitely superior lo the other. Une is a forced loan which distributes wealth, the other concentrates it : one .increases popular powers of self help, the oilier diminishes it; one is quickly paid and settled, the other is almost interminable and grows the more burdensome the more lias been paid oil it. If the New Zealand Welfare League remains silent in lace ol the above it will nut be the first time I have silenced its specious propaganda in favour of a monetary system that stands condemned by its results.- —f am, etc., . W. B. BRAY. Christchurch, 19th July, 1935. (To the Editor) Sir,—As one of the jurynicn on the Christmas tree, trial, who will be called upon about November _ next, to give a verdict on the case, will “Ikona Mali” or “Common Sense” enlighten us as to ivliat benefit the commercial or tradesman will derive from this monetary reform system advocated. fam well aware it will bc an advantage to the producer to have guaranteed prices. But what I am not clear about is, what guarantee will the shopkeeper have? He 100 lias got goods for sale, will hc_ be able to sell them at a fair profit? What advantage would it be on the present system? Hoes be sell on commission and be responsibU' to a. national credit authority Why guarantee prices, to a favoured few?’ "Why pick on them and leave the rest to shift for themselves as best they mav —I am. etc., ' ENQUIRER. Nelson, 23rd July.