DOUGLAS CREDIT

New Zealand Herald, Volume LXX, Issue 21553, 26 July 1933, Page 12

DOUGLAS CREDIT

A NEW ZEALAND SCHEME LUCERNE LAND AT TAUPO "A LAKESIDE CITY" [Following is the last of the series of articles written "by Mr. S. J. E. Closey on behalf of. the Auckland Douglas Credit Association.] It is now necessary, if the Social Credit proposals are to be given public support, that they should be presented in some coherent plan, so that a check may 7 be applied as to the outcome. I have claimed that we "have an adequate medium of exchange in real credit which is our rightful property, and that by issuing a calculated proportion to consumers we shall achieve a balanced output of industry with safeguards against inflation. Tho proportion of credit so issued and its channel of movement will be based upon the economic survey undertaken by the National Credit Authority, but in order to provide a working model for criticism I will sketcli a proposition which might take shape in New Zealand. The real credit of a nation is based upon its ability to produce wealth by means of its raw materials, men and machines, and we must therefore put forward some project upon which our credit would expand. Taking for a guido the fact that as a nation w<» have become organised and equipped as pioneers, and that our transport and other facilities are planned for expansion, we are led to seek for a land development scheme which does not threaten an immediate addition to our swollen primary exports and which can offer a style of production not exactly coinciding the present output. A National Plan I suggest that the pumiceous area in the centre of the North Island offers a means of immediately putting to work our unemployed men and mechanical equipment. Not a land settlement scheme in the ordinary sense of the term, but a bold plan of some magnitude, aiming at a new pastoral province and an inland city, for only a scheme on such lines would deal with our unemployment crisis. Its economic basis would be a mass project for the supply of legume fodder to - the surrounding provinces. Such a scheme is feasible ; under our present system, except for itsfiize andthe fact jhat the credit so issued would be a distension of the banking facilities, and its subsequent repayment would be disastrous. Coupled with a schome for social credit, however, we 'find that . there should be no distortions, and even tho waves of money movement might bo smoothed out. In its planning and function, this settlement scheme would follow the lines of the projects put in hand by President Hoover in the closing months of his term of office, and which were based upon the ideas of, Foster and Catchings, banker and economist".- Thesfi schemes carried with them thodefects predicted by Major Douglas in the regard tjiat they did not distribute purchasing power to the necessary extent, although certainly causing profit inflation. We therefore claim that in this Dominion we should accompany our i credits for wealth-creations with a pro- | portionate consumer-credit issued in re- | lation to consumption goods. The Scheme in Operation We might now trace tho flow of credit I and tho incidence of employment and ! wealth-creation which the scheme would evolve. Such constructional projects as were undertaken by the State or private enterprise, in the new region would receive loans from the Currency Control Department, carrying a rate of interest which would be necessary to control the soundness of the projects undertaken. There woiild thus be set in motion the tide of credit which passing outward through wages, dividends and profits normally has been expected to restore the prosperity of traders, but which during the years of depression has signally failed, mainly because- tho liabilities on .machines and plant have taken such a large proportion. This diversion to loan-repayments would take place hero in New Zealand and to replace the diverted funds the consumercredit would be issued. This appears alarmingly like inflation and to allay this distrust thero' must be a careful tracing of the destination of this credit. The Cycle o! Credit In the course of our developmental scheme there has been issued credits which have furnished purchasing power and a certain proportion of ; has gone to tho repayment of loans. 33(9 loan repayments- have left the community with goods unsold and to move those the consumer-credits emerge. Wo see therefore that these credits are to replace moneys wliich have gone to the redemption of securities apd thero is no congestion of currency which would cause inflation. Tho credit authority would be holding tho securities which to-day are held by the banks to support their advances and tho effect of trading and industrial movement is that tho borrowers have constantly to pay in moneys in reduction or cancellation of their advances. ' Tho money received in this way is extracted from the medium of exchange upon which our business life depends and its re-ejection in the form of con-sumer-credit is therefore the restoration of a balance and not the inflation of currency which at first sight it appears. In the example submitted above tho wages paid out in establishing tho Taupo lucerne lands and erecting a lakeside city would filter down to Auckland merchants aud Waikato tradesmen, enabling them to froo stocks from loans and houses from mortgages. As they passed in the cash or credits it would issue out again as consumer-credits to fill the gap between purchasing power and prices, working through tho trade cyclo again. Grant and Bonus There would bo two special provisions necessary which do not appear in tho above plan—a grant to tho unemployed until their tasks aro found, aud a bonus to farmers upon their exported produco prices. Both those adjustments would need to bo made prior to tho operation of tho just price by reason of tho particular disabilities undor which theso two groups labour. This framework schome is to provide a test for the operation of tho Douglas proposals in regard to creation of credit, its flow, and final extinction. My hopo is that it will furnish grounds for criticism and suggestion, onablo a hotter focus to be made when tho time arrives for tho making of a Now Zealand plan giving access to social credit. Finally, however, I cannot produco a better plea than the quotation from Shakespeare's "King John," which Sir Basil Blackett uses as a prcludo to his work "Planned Money," "Then pause not; lor the present time, bo sick That present medicine must be ministered Or overthrow incurable ensues."