BANKS AND SOCIAL CREDIT

Otago Daily Times, Issue 22713, 28 October 1935, Page 13

BANKS AND SOCIAL CREDIT

* TO THE EDITOR. Sir, — I am afraid that I am too dense to understand the Douglas Social Creditists. I can, however, accept the definition given by your correspondent “ S ” in Saturday’s issue, that in the last analysis Social Credit is based upon the co-oper-ative activity of the nation.” So is war. The fatal defect of Social Credit is that it is not broad enough on its base to include other nations. Actually, it seems to me to be too narrow for even one nation, and hardly broad enough for a grocer’s shop. But I confess that i do not understand it. That the successful production and consumption of goods depend upon settled government may be admitted; but when “S ” claims, as he does claim, that productive capacity and Social Credit are the same thing he overstates his case. My concern is with the banks’ financial credit and the exchange ot goods, not the productive capacity of settled social government, for this is not the point at issue. I have already tried to make it clear that money represents a labour measure of value and that the bank credit that is based upon labour value is, or should be, redeemable in gold. <r S ” visualises a state of things as the result of unrestricted production when a return to the gold standard would be calamitous because, he says, the gold level would have to expand with expanding credit, necessitating continuous readjustments. Here “S” overlooks the fact that the expansion of the production of goods would automatically expand the credit based upon those goods, and would not affect the gold standard reserve. It is only when the labour value of the goods is to be measured that the gold measure of value is needed. Goods may be exchanged for goods by individual agreements, but goods to be exchanged nationally for goods must be measured m value by a standard nationally agreed upon, the intrinsic value of the standard being a register of its labour cost of production; and, just as the labour cost of the production of a foot rule need not be repeated for everything measured by it, neither is the labour cost of the gold measure of value to be repeated for all the goods the value of which is measured by it. I think, therefore, that the fear of calamity in returning to the gold standard is a quite unreasonable fear after the long successful service which the gold standard measure of value has rendered to the trading exchanges of the nations. I am not afraid of a return to the gold standard. On the contrary, I am convinced that it is the essential thing needed to set ns on our feet again. I also believe tljat, instead of purchasing our currency from British sterling, we should purchase it from the world’s gold market, to be supplemented with our own gold production, and fix a gold standard of value currency of our own on a parity with our already inflated land and labour credit-created values. We cannot go back to old values. The best that I see practicable is to stabilise the values we have and let our future credits •be realistic labour credit, not idealistic social credit with its least common labour multiple. Banking credit adjustment on a gold standard has been automatic in the past. It can be so again.—l am, etc., October 27. Measure of Value.