MONEY OUT OF NOTHING

Otago Daily Times, Issue 22211, 14 March 1934, Page 9

MONEY OUT OF NOTHING

TO THE EDITOR.

SlB, —Mr C. H. Chapman's letter a few d.ays ago betrays at once striking evidence of tmfnmiliarity with the existing monetary system, and a startling paucity of knowledge ns to Douglas literature. Un-. able to grasp the truth of the statement that with the rise and fall of assets in exchange the supply of money is proportionately affected, he asks: ‘ It that is so why did the supply ot money decrease after the war when Great Britain had more assets in the form of real wealth and potentiality of production than she ever bad,” Conceding for the sake of argument that money did decrease, the answer is that Mr Chapman in asking this proclaims himself a Lawist, one who holds the antiquated notion that the currency should be proportionate to the real wealth of a country. /It is not so.. Take the case of a single individual. There is certainly no necessary relation between the quantity of money he retains and the commodities he acquires. So of a nation. Macleod (whom Hawtrey admires) says: “ The qmmtitv of money a nation possesses is simply the quantity of accumulated industry it possesses Over and above all commodities, but they have no relation whatever to each other.” Economic history in the past shows that wtih plenty of “ money ” a country may be poor. Spam illustrates this. Vast amount* of gold and silver accumulated there, yet, if we except Poland, it was the poorest country in Europe, whilst Scotland, with little currency, had the greatest comparative amount of wealth. Coming to recent times, if currency decreased in England owing to lack of effective demand, that is assets presented for exchange, currency darkened the air in Germany with an entirely undesirable result, clearly showing that the quantity of currency a country uses is no evidence oi sound finauce—iudeed, it may

indicate a waste of resources which might be better employed. A careful perusal. { by Mr Chapman of the monetary workings in the United States for the past few years would prove enlightening, in this connection. ■ ■ - , Mr Chapman tells; ns that when m America be secured loans Without security,' in excess of his credit limit, to finance cotton shipments. Just so; had the cotton not been there as a tangible;asset there Would have been no loan. . v " Without security" plays «0 part here. I have stated , that (1) Major ( Douglas was twitted by Mr M'Kenna with a lack of familiarity with banking practice, and that (2) the “New Age " compared bank managers and economic einierts > with dustmen and washerwomen. Here is evidence on the part -of Mr Chapman, a distempered _ state of the mind, and he stands convicted of what will prove to be an embarrassing blunder seeing that the statements were quit’s in accordance with fact. As to the first he can refer to the cross-examination of Major Douglas by Mr M'Kenna at the Macmillan Inquiry., . where, after an exhibition of general dullness and' haziness on the part of the former, Mr M'Kenna was compelled to ask: “Are you quite familiar with the working of the banking system?" the answer being a hesitating ‘Well, reasonably. 1 think." Still doubtful, Mr M'Kenna asks satirically, “Reasonably? and is answered, “ Yes." A few ques-' tioris later Mr MKenna says: “Possibly you are not familiar with the, working of the banking system," If this is not twitting the major I dp not know the meaning of the term, and it would be difficult to cortceiye a more humiliating experience than this for .him* ,As to the - “New Age.’l I have a carefully copied note culled from the issue of June 29, 1933, which found place on an athenteum table. It runs thus: “Both financial and economic experts, when called upon at short notice to come out of the dim light of the settled traditions and convictions presiding over Specialised daily,functions are at a disadvantage. They blink in the bright light, and it is only by taking time to accustom .themselves to the new conditions that ••they are - able to distinguish forms and judge perspectives with , the same ease as. let Us say, a duetlnan or washerwoman." An additional sneer is applied to a banker. “-It is the earns with administrative specialist*. The manager of a bank* for instance, starts level with the manageress of a tea shop—his experience has no more relevance or utility than herS, even if so much. Mi, Chapman has yet to learn that a concocted belligerence will to any cause prove unhelpful.—l am, etc., CRITIC.