MONEY AND SPENDING

New Zealand Herald, Volume LXXIV, Issue 22777, 10 July 1937, Page 19

MONEY AND SPENDING

Sir, —1 was rather interested to read the criticism by "Scot" of the statement made by Mr. Kelliher at the annual meeting of Dominion Breweries, Limited, to the effect that the total volume of money in circulation in New Zealand is several million pounds less to-dav than it was in 1031. It seems evident that your correspondent fell into the only too common error of mistaking money ''in actual circulation" for money "available for circulation," the two being totally different factors. It may be perfectly "true that there is a superabundance of foodstuffs and all the good things of life for consumption in New Zealand, but it does not followthat these goods are accessible to the masses of the people who are most in need of them. In support of his argument, "Scot" quotes bank debits, trading bank deposits, savings bank deposits, trustee savings bank deposits, etc. But it must bo obvious that money on deposit is not money in circulation. Under certain circumstances such money may become "available for circulation," but the mere fact that it is on deposit proves that it cannot be in circulation as well. The only criterion as to money in actual circulation is trading banks' advances and note circulation, and "Scot" is proved wrong on his own", figures. He shows that on June 8, 1931, total advances amounted to £52,618,000 and on June 7, 1937, these advances had contracted to £18,084,000. This proves Mr._ Kelliber's contention, as there is £4,534,000 less bankers' money in circulation today than in 1931. It is true, however, that notes in circulation have increased from £5,703,000 in 1931 to £8,894,000 in 1937, but even allowing for this increase there is still £1,343,000 less money in circulation to-day than there was in 1931. Apart from this aspect altogether, in order to ensure a sound economic balance money in circulation should be at least £10,000,000 higher to-day than it was six years ago. Ihe value of our total production has increased from £88.000,000 in 1931 to £114,000.000 in 1936, while the value of our total exports increased from £36,900,000 to £54,000,000 during the same period, an . increase of over £17,000,000, which one would expect to show up as additional money in circulation. To my mind, this tremendous increase in our national incomo proves, more clearlv than anything else, the soundness of Mr Kellihcr's contention as to the need for a greater volume of money, not "available for circulation, but actually in circulation. Sound Finance.