THE EXCHANGE PROBLEM.

Otago Daily Times, Issue 19406, 16 February 1925, Page 8

THE EXCHANGE PROBLEM.

TO THE EDITOII. Sir, —"Exchange” hoped some one would show him wherein he was wrong—if wrong at all—in Ins proposal to sell our credits in England, and accept a special note for them. In my opinion this could be done, but would it work tny better than the system now existing, without a Dominion Clearing Reserve Bank, or a State Bank in this country? It must be remembered that those millions of money in England belonging to this country are English paper money paid'for our exports delivered into England. The New Zealand growers, makers, and carriers of these exports, whether they bo wool, meat, dairy product, leather, or flax, have all been paid for their work. For example, take butter; the dairy farmer has been paid for bis milk; the factory employee has been paid his wages- railage, cartage, and storage have been paid; dividends have been paid to shareholders in the factory. These payments have all been made with New Zealand paper money, and the butter and cheese have been sold in England and paid with English paper money. Therefore the first question is: Whore and how was this New Zealand money created to pay for these exports? The second question is, who is the rightful owner of these millions of English paper money or credits, since the producers of our exports have all been paid? There are two separate sorts of money to bo dealt with—local and foreign. The local is the domestic currency or money used for domestic xvurpoaea, such as the payment of wages and the payment of all taxation, and the currency used in the selling and buying of all commodities within the State in which the money circulates. The essence of a sound domestic currency is that m-cry credit issued shall bo based upon a deposited security, upon bills that represent product, upon deeds that represent the taxable wealth of the community. Modem currency takes the form of the cheque for notes (guaranteed by the State) as small change, and for the payment of wages. The growth of the cheque system has had the effect of transforming the character of banking. These cheques are redeemable not in gold but in paper notes, and so long as the attention of the people is riveted, not on the veal currency paper, but on its assumed basis (gold), correct conclusions upon currency questions are impossible. Tho idea of the intrinsic value of money is discarded by all persons conversant with the working of domestic currency. Most jieople fail to realise how much our financial system rests on ths good faith and confidence of the general public. Those who have followed the course of hanking legislation in New Zealand for the last 10 years known what anti-social methods have been adopted. The banks have been allowed—nay, encouraged—to exploit public credit, to the detriment of public welfare, and if the proposed sale of our credits in England were carried out tho only ‘beneficiaries would lee the banks and money lenders. Foreign money is that paid for our exports. We export only to give ourselves a means by which wo can pay our foreign debts, and pay for imports. Whether our imports be cutlery manufactured in England, or coffee grown in Brazil, or motor cars manufactured in America, the chances are they will be paid for by bills of exchange on London. Tile principal error wo commit economically is that we think more of exportation than wo do of the needs of omen people. Our exports should not exceed our needs of payment for our imports, etc. AVe are at present suffering from overcxnportation or under-importation. Therefore, we are unable to balance our exchange except at an apparent financial loss. Money is not wealth. It is the representative of wealth in all its forms; in other words, it is a labour-saving machine, used for measuring the value of all wealth. Value, like hate, love, esteem, and ambition, is vague and indefinite. It is an atributo of the mind. It cannot be fixed, measured, or standardised. Value being the accidental varying relationship of one article to another, no single article can have a standard value; it can only be compared with another article, and the" article or machine used in the comparison is called money.—l am, etc., Gore, February 12. A. Gosdon.