THE FINANCIAL SPHINX

Otago Daily Times, Issue 21723, 15 August 1932, Page 9

THE FINANCIAL SPHINX

TO THE EDITOR.

Sir, —Mr Moss draws my attention to a series of events associated with Britain’s war finance, which presumably he regards as primarily responsible for the present disorganised industrial conditions. No factor other than the expansion of the currency by a fiduciary issue to the extent of £320,000,000 can be advanced as a form of war finance that can account for the inflation of the currency. The reaction that followed from this phenomenal expansion now forms the experience of every part of the Empire, and has produced a startling paradox. How can money be scarce when it never was more plentiful? In January, 1931, the city editor of the Daily Express supplied a remarkable summary of the money at call available in Britain at the end of 1930. The amount was £2,786,000,000, practically cash in the pocket, which is a saving that the British public does not use fully. It included £1,839,000,000 in bank deposits, £290,000,000 in post office savings, and £480,000,000 in saving certificates: All can be drawn out on demand or short notice. It is, therefore, liquid money. The paradox can only be explained by pointing out that, while the volume of money never was more abundant, the scarcity of it arises from the public not using it fully. This again requires further consideration, since the owners of these vast millions are but a relatively small number of the total population. The savings of the working classes, the majority of whom are wage earners, are quite insignificant compared with their number. On the other hand, the bulk of the £2,786,000,000 is owned . relatively by a handful, who find it quite impossible to use it for their personal wants, and, having no prospects of profitable investments, resort to gilt-edged securities. The scarcity of money in circulation, therefore, arises from its maldistribution and not from its scarcity. When every worker is properly remunerated there can be neither financial disturbance nor unemployment. Supply and demand will balance one another when it is understood that wages must measure the value of production. It is here that our system is defective, Wages are not determined by the volume of production, which ought to be the determining factor. As Major Douglas so tersely says: “Modern business is practically based on the creation of a scarcity value. The' whole efforts of general business communities are to be able to control prices to such ah extent that you get the maximum price for the minimum delivery. Taking it collectively, that is the basis of the whole thing, and is, according to the rules ot the game, perfectly legitimate. Your object in business at the present time is to make money. It is not to deliver goods. The delivery of goods is incidental to the making of money, and n you can deliver fewer goods tor more money, then that is sound business, } and the .banker is a sound business man. In this brief statement we find the crux of the whole problem that fires the enthusiasm of Miss King and an ever-in-creasing', number 1 of the public. Is Major Douglas’s statement true? That is the first thing to decide, and it is for M Lloyd Ross and Mr Moss to refute, it before it becomes 'necessary to examine the soundness of Major Douglas s plans for a solution. It is the ethical elements that give an irrefutable vital force to Major Douglas’s expressions and paralyse the quasi-scientific arguments of the orthodox economist. Can we exclude Christian ethics from business? That is a question for the Church to decide, as t docs not fall within the scope of the economist’s sphere of duty to explain, ad of which shows ns, as the Prince of Wales said -in his address last week, the problem is one of distribution, difficult but not insurmountable.” But how. That IS the question.-! am. g^RTgEn>