CURRENCY INFLATION.

Otago Daily Times, Issue 21198, 2 December 1930, Page 5

CURRENCY INFLATION.

" TO THE EDITOR. Slß,—Many, must have read the address of the chairman of the Bank of New South Wales and your sub-leader upon it with mingled feelings. The facts presented are so plain, but painfully true, that no one can dispute them. A bank manager is undoubtedly qualified to speak upon finance, and in addition he requires, above all others,' to be acquainted with the operation of economic law. That is just the reason why bankers hold the whip in their hand, and can crack it with impunity. The multitude at all times is completely at the mercy of monetary power. The absence of money makes the • individual quite helpless, miserable, and at times either despairing or desperate, and Mr Buekland is not sparing in his remarks now that financial conditions nave given him the opportunity to use his power with authority. There is only one thing doubtful in his address. He makes no reference to the cause and origin; of currency inflation. This omission is highly significant, because, while finance is a complicated affair to most peoples understanding, inflation is quite plain, and ean be.explained to those who are uninitiated. It is all contained within the word income,” both private and national, measured in money.’ If our income drops our financial difficulties commence, and we are forced to retrench. This arises, as Mr Buekland so forcibly points out. from the fall in the price of our exports, which, upon inquiry, it will be noticed, had steadily .increased in price since 1896. Now, durihg this period of rising prices the only person who displayed any discontent was the wage earner. The steady rise in the cost of living at once reduces the purchasing power of the wage earner, and to him constitutes an actual reduction in wages, inis became" so obvidus that the Legislate was forced to establish compulsory

arbitration as a remedy. Rising prices in the nature of things can never be benencial to the wage earner or to people with fixed incomes. On the other hand, rising prices widen the margin of profit, forming the only source from which forc?n., e * na( ie in commerce. It is this fact that forms the central rest upon which all financial promoters base their calculation of profit. If the world’s general price level is rising an expansion of credit at once comtnenes, very gradually at first, but as credit expands the volume

ot money in circulation increases and with the increase prices rise. Now, the question at once arises, whence did the increased volume of money come? . ~ s. the obscure point that is not visible to the public. That, however, is immaterial in proving inflation, .because, irrespective of the source and nature of money, inflated never manifests itself before the buyer discovers that he has to pay more money for an article which substantially remains unchanged in all its intrinsic utility. Money, being the measuring rod of value, at once tells us that ■tne increased cpst of an article is a rise m price,.but not an increase in value,

this proving that the seller gains at the expense of the buyer. To overcome Mi is anomaly the buyer in turn requiries to nX 6 i income increased. This is possible only by demanding more money from the people with whom he deals without himself being able to offer more valuable service in return. And thus the move goes on, stimulating production in the a ßg re K a te until it produces a glut which causes price to fall and thus terminates the rise in prices of a vicious trade cycle. How, it is perfectly plain to shrewd

business men that this a rise in prices was brought .about by artificial manipulation of the currency and that that currency was not gold. Mr Buekland lays the blame upon the extravagance of the community and “the excessive zeal to borrow by folk who calculated on a continuous rise of prices and of capital values," Evidently Mr Buekland, as a banker, had ho faith, in the stability of rising prices, but nevertheless his bank continued, with other banks, to advance loans during more than 30 years to governments and municipalities which he now blames for the crisis. Did he not know that promoters of these extravagances had the sanction of the banks from which the loans were obtained, and does he forget that one of the reasons > advanced by Sir Otto Neimeyer, in his explanations of the present financial plight of Australia, was that lenders of money had been too liberal in their advances? Does this not show us how close are the financial relations between the banks and the industrial prosperity of the people, and do we not clearly see that it is the hands that control finance that must he held responsible —that the methods at present guiding financiers are in their economic result disastrous to the great majority of the people who in the nature of things are not, and never can be financiers, and therefore can not assist in explaning how the crisis has come about, nor be held responsible?—l am, etc., W. Sivebtsen.