ECONOMIC FALLACIES

Otago Daily Times, Issue 21994, 1 July 1933, Page 5

ECONOMIC FALLACIES

TO THE EDITOR.

Sir, —“ Truth ”in your issue of Wednesday accuses me of -wishing to cast odium on those who maintain with Air Hawtrey that the banks create the means of payment' l by: lending, and that it becomes* necessary therefore for me. to deride “Truth,” Jdr Hawtrey, Mr Reginald M'Kenna, Mr H. D. Macjcod, and others. ■ Not so. “Truth’s” presentment of the position is a gross travesty. I was not dealing with this aspect of banking methods at all. I was ridiculing the crass quackery—l repeat, the phrase despite “Truth’s” inquest—involved in the persistent claim so dear to Major Douglas and his followers, that banks create money or credit out of nothing. “ But when a bank makes; money it makes money out of

nothing; it gives nothing and lends everything.” Though emanating from the major himself the ; quotation is ... incontestably untrue, as shown by Professor Cameron . and Professor Laughlin. and ranks with the_ major’s other shallow' juysticisms, to wit, the A plus B theorem. Real Credit, the Just Price, and the recent scheme designed to 'hurl the wily Scot into affluence. This humdrum ritual thrust upon experts for confirmation meets after careful examination with curt dismissal, and it is obvious, having the recent rebuffs of the Federal Government of the Commonwealth and the Government Statistician of New. South Wales in mind, that these, pathetic appeals, fortified by a due apportionment of Social Credit, abracadabra, are in all currency courts of appeal quite-as unpopular as cockroaches*, : ; The use of fair phrases "to arrive at guilty ends is characteristic of the stale propaganda emanating from “ Truth.”' We get little: doses of Social Credit fallacies coupled with quotations from writers like M’Kenna Alacleod, Hawtrey, and others, the sinister suggestion being that _ the Douglas proposals are based on views held by the economists, indicated; the fruit befitting the tree. Those who, like X the majority of social credit adherents, have never read a book on matters economic in their lives may be impressed by this utterly unfair procedure. It is still starkly true that each and everyone of these waiters, our national watchdogs in the arena of banking and currency provide no evidence of accrediting Major Douglas-with the power to revolutionise > the economic life with golden results. The fundamental basis of social credit is a hoary delusion which has infected currency literature for more than 100, years —that is, basing currency on commodities. A prominent exponent of this curious idea declared a century ago that “ any goods that have the qualities necessary in moneymay be made money equal to their value."' Alacleod tells us: “In this sentence is concentrated the whole essence of that eternal delusion, so specious and plausible, and so fatal, which 1 , we. designate as Lawism. It is ‘ indeed nothing but the stupendous fallacy that money represents commodities, and that paper currency may be based upon commodities. No man who does not thoroughly purge his mind of this noxious weed can ever attain the remotest glimpse of true monetary science. Aloney does not represent commodities at all, but only capital, the accumulation of labour, which has, not yet been given, for commodities. ". , . But the money of the nation is the mode and form in which the accumulation of industry which has not yet been spent in commodities is preserved;; and, if; a nation wants other com-, modities besides those it has it must pay for them either with money or with the goods it has already”; It is quite obvious in the face of these utterances by Alacleod that adoption of the Douglas scheme would create an army of licensed- , pickpockets. s “ Truth ” desires a " plain answer to the question: ‘Where does money come from?”’ Briefly thus: If, all exchanges balance no money or currency or media of exchange Wonld be needed, as,. howdyer, goods Or services exchanged are of unequal- value every highly civilised natidft has evolved a device roughly spoken of as money for registering unadjusted' .balances, of in reality rights of action against the community. Aloney thus becomes exactly what it should be, the representative of debt, and we thus come to recognise that transferable,; debt „ and currency are convertible terms; Alacleod says “currency is the representative of transferable debt, so that whatever represents" transferable debt is currency.” And, again, “ without debt there' can be no currency.” • 4May Tin'closing be; allowed to'sa'y-that the signature to my last letter was printed as “ Credit? ” ' It. should. have been ‘-•Critic.’'—l am, etc., Critic; , d June 29. .... ' .. - ; .