PUBLIC CREDIT

New Zealand Herald, Volume LXXIII, Issue 22481, 27 July 1936, Page 12

PUBLIC CREDIT

Sir, —I have read with great interest the controversy in the Herald on the Public Credit. Mr. Johnstone states very definitely in his letter of Monday that all talk" of costless credit is rubbish. Is it? Not only is there a possibility of using costless credit but it is very simply proved that .it can, iu addition to being costless, be applied to save money to the public. For instance, if the Government will only apply unemployed labour to idle resources or raw material and create an asset in the form of a road, shall we say, and as that asset is being created, use their power as owners of the Reserve Bank to create currency for the purpose of paying the builders of the road. We see there a definite application of costless credit. It costs the Government nothing or practically nothing to create this currency. It costs the tax-payer nothing. It is sound money because it is backed by an asset. It. definitely increases purchasing power and without an increase in purchasing power we cannot lift the depression and have prosperity. It saves money for the public, because it finds a job for the unemployed and does away with the necessity for Unemployment taxation. In every sense of the word, it. is an application of costless credit, easlv understood, such as Mr. Johnstone wants demonstrated. As a manufacturer, I should be glad of the opportunity to exchange goods for this money. A. C. K. Lee.

Sir, —Mr. Robinson now admits it is "elementary" that bank borrowers obtain goods or services and that payment must be made. In so doing he gives his whole caso away. The fact that goods may, in certain circumstances, be unsaleable does not affect o'ir obligations. If goods cannot be sold the producers lose the cost of their production, but to say that whenever we pay with cheques drawn on overdrafts we are paying for goods that would otherwise be unsold, and that therefore their value is that of "unused stores" is to deny all responsibility for payment. Goods are never costless, and by no honest process can payment for goods be evaded. Can Mr. Robinson name any commodity, wool, butter or any other that, year in and year out, has accumulated unsold in the Dominion through insufficiency of bank credit? Failing such evidence, where is his case? As for what might bo produced, T have had to point out again and again that only with additional work can additional goods he produced. Bank credit is utterly impotent to do anything of the kind. No one, I suppose, denies that when the Government arranges with a bank for an advance the arrangement costs the bank nothing, apart from book entries. But when the Government draws cheques on the arrangement it obtains goods it cannot expect to obtain for nothing. If the cheques are cashed, the bank will pay for the goods; if thenare deposited, the bank will owe the amount to the depositors. In every case the bank becomes responsible for the prices of the goods the borrower dbtains, exactly as an auctioneer would if they were purchased bv auction and it is nonsense to call such a transaction "costless." Whether, under certain circumstances, the goods might have remained unsold has nothing at all to do. either with their cost, or the moral obligation incurred by those who receive them to meet that cost. Mauurewa, J. Johnstone.