MONEY OUT OF NOTHING

Otago Daily Times, Issue 22203, 5 March 1934, Page 10

MONEY OUT OF NOTHING

TO THE EDITOR.

Sis,— lk was most interesting to see the reaction of "Critic" to the earth; quake Mr* Hawtrey unwittingly involved " Critic " .in by the statement ,that when a,- bank lends it creates money, out of nothing. Whereas in the. case of Mr M'Kenna. who has said the, same thing in a different way, the quotation is distorted, in Mr Hawtrey's case the latter is not lucid, and apparently is prone to make'doubtful statements, As Mr u. B. Shaw has said, there are some people, who simply. cannot be satisfied. Make them happy, and they batlle you by putting on a hair shirt. It was also interesting, to note that Mr Hawtrey, despite some considerable experience plus a good deal of detailed study plus daily work m his Majesty's Treasury, can be completely wrong on simple questions of purchasing power and acceptance of gold by a bank.: At least one of "Critics" statements does , not appear on the face ,of it to coincide with facts. If, when asseta diminish, supply of money is proportionately affected, "presumably, when assets increase, the supply of money is also proportionately affected. If,that is so, why then did the supply of money decrease after the war when Great Britain had more assets in the form of real wealth, and potentiality of production than she had ever had? Hawtrey was notquotea by me in support of any statement of Douglas, but if he had been I; do not see why it should be inconsistent. Ihere is very little difference as to facts between Douglas's-analysis of the economic situation and that of orthodox economists. Indeed, about the only fact that Douglas states which could not be found confirmed in some orthodox man's Works is the question of the velocity of circulation. I regret to have to tell "Critic that in 1921-22 I often had a loan from an American bank without security,, and in excess of my credit limit, to lnlance cotton shipments, but perhaps American banks depart from lucidity and should be approached, with misgivings. Ido not as a rule pay much attention to the New Age descriptive efforts of a general nature, such as the analogy of economic thought to a quaking morass, but since "Critic" has been good enough to point that one out to me specially, I must admit that it seems quite reasonable to me. If Hawtrey is not lucid: it after all his experience he can be quite wrong in description of simple -matters; it economists are saying and people are believing that we live by exchange ot goods and services; if credit is created on the security of borrowers' basis; 'hen I do not think that it could seriously be ) denied that economic thought is a quaking morass, nor that quite obviously financial principles are beina accepted as axioms without investigation. The New Age has, of course, never compared bank ■ anagers to dustmen or washerwomen, nor was Major Douglas twitted With a lack of familiarity of banking practice by Mr M'Kenna, but such twisting of facts is part of the main armoury of ' Critic, consequently nobody is either hurt or surprised.—l am, etc., _ C. H. Chapman.