SAVING AND SPENDING

New Zealand Herald, Volume LXX, Issue 21503, 29 May 1933, Page 13

SAVING AND SPENDING

Sir, —Can Mr. Johnstone tell us what is wrong? His argument is based on tho statement that the value of securities falls becauso prices fall. Now, prices fall because there is a shortage of money, and the value of securities falls because prices fall and tho banks have to lend loss, thus causing a greater shortage. Does Mr. Johnstone expect the system to work? Again, in bis farm illustration, tho loan from the bank was the first step that created the deposit. Had the seller used his £IOOO for manufacturing, wages, salaries and dividends would have been available as purchasing power. It was open to the seller to have leased his farm on a purchasing clause and get his interest direct from the lessee. But look at the difference in the amount of business done. Lack of business means lower prices, lower value of securities, less money lent and tho bank determines which of the two courses shall bo taken. A system that can make more money available so the extra money buys more goods instead of the same quantity of goods at higher prices, will put everything right. Major Douglas' proposals seem to fill the bill. Faih Play.