SOCIALISM v. SOCIAL CREDIT

Otago Daily Times, Issue 22487, 4 February 1935, Page 10

SOCIALISM v. SOCIAL CREDIT

TO THE EDITOR Sir, —It should not be necessary to remind " E. W. F." that this depression is world-wide, and that the exponents of Douglas Credit attribute it to lack of purchasing; power, which also must be worldwide. *E. W. F." acknowledges that depreciation charges must eventually be paid out for new machinery, thereby becoming purchasing power somewhere at some time. In the same business depreciation charges and expenses for new machinery balance only within long periods, but for all industries over the total area of the depression they ma;' be assumed to balance annually. No business or industry can be self-contained as far as sale and purchase are concerned, and what is a depreciation charge in one industry serves to purchase the product of another industry. Hence no purchasing power can be lost through depreciation charges. Another serious flaw in the Douglas Credit system is the premiss that banks issue new money ad libitum and cancel it when the loan expires.' In respect of note issue banks are under legal restrictions. But whenever a bank is empowered to issue, say, £IOOO of new money, it increases its own assets to that amount, at the same time causing a depreciation in the money already in circulation to the total value of approximately £IOOO. Hence every pound in circulation buys a little less than before. This, of course, applies only to a paper currency such &s we have now.

Banks do not cancel their own money, for in go doing they would be destroying their own assets. Cancellation would take place if the Government •> were to begin to revert to the gold standard. But the Government would have to destroy some of its own funds, thereby raising the value of every pound note left in circulation. Our Government keeps its pound at *&, certain ratio to the British pound, which the British Government regulates carefully by means of the Exchange Equalisation Fund.—l am, etc., H. Gow. Balclutha, February 1.