INFLATION PERILS

New Zealand Herald, Volume LXXIII, Issue 22390, 9 April 1936, Page 13

INFLATION PERILS

BANK'S FUTURE POLICY CRITICISM OF MEASURE DANGERS OF UNLIMITED POWER [BY TELEGRAPH —SPECIAL REPORTER] "WELLINGTON, Wednesday An explanation Government's financial policy which would follow the State control of currency and credit was sought by the Hon. R. Masters in questions addressed to the Leader of the Legislative Council, Hon. 'M. Fagan, during the second reading debate on the Reserve Bank Amendment Bill in the Council to-day. Mr. Masters described the bill as the most important that had been brought before the country on financial questions. He disagreed with those who contended that the depression in New Zealand was caused mainly by monetary considerations. "I say without hesitation that the real cause of the troubles of this country is the troubles of the world outside," said Mr. Masters. Hon. F. E. Lark (Auckland): So we starve while the world goes on. Real Policy Requested Mr. Masters said he was speaking of the causes, not the effects. He wished to ask the Leader of the Council what was going to be the real policy of the Government when the Reserve Bank came under its absolute control. Mr. Fagan: In regard to what? Mr. Masters: Particularly in regard to inflation.

Members: There is going to bo no inflation.

Mr. Masters quoted extracts from a pronouncement by the former Chancellor of the Exchequer in the Labour Government in Britain, Viscount Snowden, who had stated that the Labour Party seemed to be obsessed by the idea that the banks created an unlimited amount of credit. Viscount Snowden pointed out also that a Government was the only authority that could create money out of nothing, as had been done during the war with disastrous consequences. "If I read this bill correctly," said Mr. Masters, "that is what is going to happen in this country. I*am not concerned whether this is going to be a State bank, but what I am concerned with is the future policy of the bank which is to come under the control of one man—the Minister of Finance. Tremendous power is to.come to this one man and the people want to know what effect the policy of the bank is likely to have on the wellbeing of them "Perpetual Inflation Bill" The Hon. J. Alexander (Auckland) said the traditions of the Council were against factious criticism, but he felt he would not be doing his duty if he did not point out what he considered were dangerous provisions in the bill. "I think that when the country thoroughly appreciates the implications of these amendments to the Reserve Bank Act they will astound and'appal many who voted for the representatives of the Government of this day," said Mr. Alexander, who dealt with the various clauses to show that enormous powers were in the hands of the Minister of Finance. The bill might well be called the perpetual inflation bill. It was like a perpetual motion machine, in which the inventor had implicit faith, but which invariably turned out to be a failure and no more effective than the philosopher's stone. . The Hon. E. R. Davis (Auckland) said he agreed with the opinions expressed by Mr. Masters regarding the perils of uncontrolled inflation. The economic condition of New Zealand was improving month by month and the Reserve Bank should have beqn left alone. Nevertheless, he intended to vote for the bill, because he believed he should follow that course in view of the endorsement of the Government's policy declared during the election campaign.

Council Passes Bill "I am willing to acknowledge that 'there are potential dangers in the bill," said Sir Charles Statham, who added it should be remembered that every pound raised under the bill was a pound owing by the Government of the day. He had yet to be enlightened as to how one could get money for nothing. Replying at the conclusion of the debate Mr. Fagan said that what little inflation took place, and there would not be much,, would be used to increase the prosperity of the country. He was not prepared at that juncture to discuss the Government's probable commitments under the guaranteed price scheme for dairy produce. The whole of that question would be discussed in 10 or 15 days, when legislation would be coming down to deal with the subject. The second reading was agreed to on the voices at 4.35 p.m. The Committee stage and the third reading occupied only a few minutes and the Council thfjn adjourned until April 16.