CURRENCY REFORM

New Zealand Herald, Volume LXIX, Issue 21315, 17 October 1932, Page 12

CURRENCY REFORM

Sir, —As your readers are aware, I have never stated that the debts contracted since 1929 exceed in volume those, still outstanding, contracted previous to tho slump, but I have said that they must soon do so, as must surely be admitted. The value represented by mortgage registrations of date previous'to the slump is very uncertain, but Mr. Haddow's assumption that tho volume of our debt contracted previous to the slump is ten times that contracted since 1929 must be based on myth rather than fact. During the two years ending March 31, 1931, mortgages were registered representing £69,000.000. Fixed deposits have increased since 1929 by £4,710,000. The amount of private lending cannot be ascertained, but it is notorious that during the last three years a vast aggregate of credit has been granted by the business class. Under the policy of price restoration all these debts would be liquidated with depreciated currency, which means simply that a plain swindle would be worked in almost every case. The business class having lost heavily by deflation when selling would again lose through inflation when receiving payment. Sijnilarly, the farmer forced to sell his farm at a slump price, and accepting a mortgage for the amount, would be swindled onco when selling his depreciated farm and a second time when he finally received payment in depreciated currency. As I have already said, contracts entered into previous to the slump could be adjusted to present price levels by sealing down the volume of debt, and this procedure would not make inequitable the liquidation of debts contracted since 1929, as price restoration undoubtedly would. It is beyond dispute that purely local 50 per cent inflation would causo a 50 per cent rise against us in exchange rates. If, then, two merchants purchased goods in London at the cost of £IOOO in each case, the one receiving three, and the other six months' credit, if the first made his payment before inflation he would pay £IOOO. while if tho second paid after it he would pay £ISOO, though the goods would be sold at the same time and at the same price level. Again, if two farmers sold produce on credit in London for £IOOO in each case, the one receiving payment before inflation would receive £IOOO, while the one who received payment following inflation would receive £ISOO, though the commodities would bo produced at the same cost in both cases. In many cases it would, of course, be the dealers in export produce who would reap the unearned gain from the rise in exchange rates, while tho farmers who received payment previous to tho change would find their money depreciated in value by beneficent "reflation.'' • J. Johnstone.