BORROWING

New Zealand Herald, Volume LXXIII, Issue 22512, 1 September 1936, Page 15

BORROWING

gj r> —Johnstone, in criticising our Prime' Minister's published remarks on borrowing, makes an unwarranted accusation against the Labour Cabinet when he states, "It is also obvious' that they have never learned the simple truth that money has no power to create goods; no power to create purchasing power; no power to create employment. It creates nothrns but prices. More money moans higher prices and higher prices brine no gain to mankind." It is obvious to the majority of the people of New Zealand that no previous Cabinet ever had such .an understanding of our financial system as our present Cabinet, and this can be said without disparagement of past governments, because of the past general ignorance on the subject of money. But there is no such ignorance to-day, and the Labour Government has in its ranks many learned and intelligent students of finance who are not only fully conversant with the merits and demerits of the existing system, but also with the proposals of disinterested bankers and economists to make money serve the best interests of the people. Mr. Johnstone's statements above, while they are partly true of money in the abstract, are contrary to fact as regards the operation of money in the hands of the members of the community. As soon as money is handed over to a retailer the incentive to create new goods is maintained. Money is purchasing power for the simple reason that people will hand over their goods and services for money. Money has power to create employment for the simple reason that money is an order to claim goods and services. So that wo do not Ret very far by such abstract statements. Nor do we help the situation by asserting that higher prices bring no gain to mankind. Mr. Johnstone knows quite well that higher prices enable debts to be paid and that lower prices brine bankruptcy and ruin. What we want is right prices which can he established only hv the right provision of money. W. J Gatenby.