THE MONETARY SYSTEM

New Zealand Herald, Volume LXX, Issue 21553, 26 July 1933, Page 13

THE MONETARY SYSTEM

Sir, —Mr. J. Johnstone makes dogmatic. statements concerning depreciating tho value of currency. He says "the peoples who tried it, in place of achieving boundless prosperity, were invariably deluded, robbed and impoverished by it, and in every case abandoned it for those sound reasons." If Mr. Johnstone is correct, then that vast nation, tho United States, is prepared to head for disaster, as Congress has quito recently passed a bill permitting tho President to lower at will tho gold content of tho dollar to 50 per cent) of its value, at that time. France, in 11)26, reduced the value of its currency by four-fifths, and since then has maintained it at this level. May I ask Mr. Johnstone when does this process of being "invariably deluded, robbed and impoverished" begin to occur? Novus Homo.

Sir, —Mr. Johnstone, in defence of what he has called tho necessity for deflation, mentions the case of Germany, who so inflated her currency as to wipe clean the internal slate as though a subsequent deflation would redress the wrong done to creditors. He knows very well that on the other hand Britain, during the period of which wo are speaking, twice appreciated her currency to the gold standard, and he knows what this meant to debtors. If, as Mr. Johnstone has said, money obligations, costs, etc., were not adjusted to the 1928 price level, why have these matters not now adjusted themselves? Why is it that the choice of two courses lies before creditors, the scaling down of debts or tho raising of prices? Mr. Older has said that the figures given by Mr. Johnstone are meaningless, but to me they tell a story of unbalanced production. Volume of production in this country fell by 8.4 per cent per head between 1929 and 1932, but some primary industries have increased each year their volume of output. Between 1929 and 1931 volume of production fell by 21 per cent in Great Britain, and as Mr. Johnstone says, further falls have undoubtedly occurred sineo then. During tho same period our volnmo of exports to Great Britain has each year shown an increase, and our butter exports this last season show a 25 per cent increase over exports for last season. Now goods exchange for goods and this state of unbalance shows itself by a fall in prices received for those products which are relatively overproduced. Wheat, rubber, cotton, meat, butter and other primary products are in this position, and some attempts have been made to control their production. In tho opinion of the writer, 110 permanent stability of the industrial structure is now possible unless it is consciously planned in such a way as to maintain a proper balance between tho various branches of our activities, and whether national planning is possible without a radical change in our method of government is by 110 means sure. The psychological effect of a degree of inflation may yet prove necessary for a revival which could bo but temporary. P. Jesscp.