MONEY AND PRICES

NZ Truth, Issue 976, 9 August 1924, Page 4

MONEY AND PRICES

ROLLESTON'S DEFLATION PLEA.

Mr. F. J. Rolleston's speech m the Financial debate is, the most notable (so far) of the session, -not for any constructive and" convincing policy it contained, and not for any special logic or lucidity m matters financial, but because it stated issues for the jury of public opinion — tho real vital issues cf economics. - . . . Parliamentary debate has fallen to a very low level when a speech has to be awarded first prize for merely containing questions that the speaker cannot answer. Bui since the Parliamentary debater of the day merely deals m superficial platitudes, avoiding fundamental issues as though they [were sleeping dogs, whatever honor there is m tho rhetorical contest belongs to him who at any rate has the courage to delve. :: * :: :: Part of tho indeflnitcness attaching to Rolleston's attempts to reply to his own question's may be duo to inadequate reporting. That question cannot be definitely ' settled till th^e "Hansard"- report comes to hand. In the meantime it. is not clear whether Rolleston advocated active steps to return to the gold standard. Apparently he did. :: :: :: If so, he has much more pluck than Massey had as author of the Financial Statement. Massey quoted an Imperial Conference resolution m. favor of the gold standard, and — left it at that. What is admirable m Rolleston is that, quite unlike Massey, he has the sincerity to show the country right away what it is up against m returning to tho gold standardf It would mean (he is reported as saying) that "everyone who lent the State £100 In 1915 or 191 C would rcceivo back, m purchasing: power, just double that amount." Let us try to apply the thing concretely: A big landholder m 1918 or 1919 sold his land at boom price for soldier settlement. Land was then dear relatively to money. The big man turned his land into money, and put tho money into tax-free war-bonds. Make note, then, that when land reached its peak, tho big man was ready to profit. «: :: :: Now comes the movement back to tho gold standard, which means deflation of land and commodities; m other words, dropping prices; land, etc., falling, money rising. The man who had the land, and who now holds the money, finds things again running In his favor, Ho catches tho tltlo botii

ways. Make, then, a second note — that just as the big man was ready to profit at the peak price of land, so also will he be ready to profit at the peak price of money. The conversion of land (sold at peak prices, the result largely of the Government's own land-purchasing) into tax-free war-bonds (appreciated through their exemption from income tax, and to be still further appreciated by deflation as described above) gives an unparalleled opening for a capitalistic double robbery ,;jpf v the community. s: ' ij :: No wonder Rolleston hastens to say that the community must "get rid of the war debt, because, as deflation proceeds and the return to the gold standard approaches, the burden of the war debt is gradually getting greater and greater." Thus the man'" who turned his property into money at the right time rides on the crest of the wave. . ' v :: :: But it is fair to add that tho "scoop" made by such a man is only 4 P&rt of tho process of deflation. Even m the face of monstrous spoils to individuals, deflation may yet be the best policy for the country. The issue is far too great and complex to be decided on Individual cases; A riso m the purchasing power of money means betterment not only for tho big man who sold his land m 1919, but also for the Savings Bank depositor (littlo or big) who draws savings put together m the high-wage years 1916-22. A girl who married last year, and, drew from the bank her pre-war savings, struck it wrong. But the girl who draws m 1927 her 1916-22 savings may draw with increment. In between these extremes is a complex Df possibilities dofying analysis. But there Beems to be a perceptible tilt m favor of deflation as against stabilisation. How rapidly, though, shall deflation progress? Rolleston would tax production and apply the tax-moiiey to capital expenditure, to the extent not merely redeeming debt but also of paying for current public works. To avoid borrowing he would maintain (perhaps increase) existing taxation. Such a Spartan policy would speed deflation. But what about tho cry that the high rato of taxation is cutting its own throat, and that production cannot be stimulated save by tax-reduction? :: " :: Rolleston ha'a given tho country Homethlng to think about. Ho has struck a keynote touched by none other. "Who} is game to meet him en his own ground! ,> ♦