WHY A CHANGE MUST COME

Nelson Evening Mail, Volume 80, 10 April 1945, Page 6

WHY A CHANGE MUST COME

[To the Editor] Sir, —The people who howl against inflation —and I am one—may now begin to turn up—with me—against deflation .... in recollection of those years. In 1943, the total of Reserve Bank currency increased by £25 millions; in 1944, only £2 millions. In 1943, the total of Reserve Bank credit money increased by £l7 millions; in 1944 it decreased by £l2 millions. This means £l2 millions was repaid by taxation, therefore cancelled out of existence. In 1944, however, whilst there was this decrease in money in circulation, £9O millions was owed the trading banks. Although prices, wages, and taxes arc at new peaks, not only is dreaded deflation under way but also war-expenditure is tapering off. The significance of these figures is increased by the record high level of our overseas funds, £57 millions, which we need to supply wartime wear and tear of both capital-equipment and consumer-goods. Just what will happen when we start to draw on these funds? As importers start paying for each shipment as it arrives, the £9O millions now in the banks will decrease (i.e. deflation)—unless new Reserve Bank issues or trading bank advances are made (i.e. inflation). If, say, £2O million of capital-equipment arrives to increase our own production of consumer-goods, what will happen? Assuming no more new advances are made, then except„peopJ.2 immediately draw on savings—and they will not be anxious to do this—there will be £2O millions less in the banks with which to buy the goods. People, not being able to buy, induslry will not be able to sell therefore use its new equipment. Employment will fall. If the advocates of deflation have their way—and I am not one—a slump is inevitable. If the advocates of inflation have their way—and I am not one—higher prices, wages, and taxation are inevitable. The National Debt is already £600,000,000. If, however, the Reserve Bank were to be used as a public service to finance rehabilitation, local-government, and national projects on a non-interest loan basis; and to repay war savings as required, on a non-repayable (i.e. debt free) basis; then—providing done just to the extent needed to maintain pur-chasing-power through employment and proper pensions—the post-war situation—without interfering with the Bank of New Zealand —can be sqxrely and confidently met. But such a change of policy means social credit—to which both the present inflation party and deflation party have always been deadly opposed. Think over these facts * and figures and you will see why social credit must come—and the inflation and deflation parties go.—l am, etc., REAL DEMOCRACY. Nelson, 6th April.