THE FUNCTION OF MONEY

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

THE FUNCTION OF MONEY

TO THE EDITOR. Sik, —It is an undeniable fact that no material commodity has greater attraction to the human mind than money. It is the first thing a‘child learns when it is given a penny with which to buy sweets, and gradually, without further instruction, the child grows conscious of the power of money by which wealth is purchased. The origin and function of money date back in history thousands of years, and the evolution of money, from the primitive shells in use among the savages to the discovery of the precious metals by a more advanced civilisation, forms an instructive record of economic progress up to the present day. But with all the complexity which now obscures the problem of money, its function as a medium of exchange was as clearly understood by the primitive savage as it is to-dav by the astutest .financier. It is from the second function performed by money that the trouble arose from which the whole commercial world now suffers. As a medium of exchange money requires no explanation. It is as a measure of value that its function becomes complicated because as a measure of value it has to determine prices of commodities and services which are not money. To understand this function requires brains. Otherwise it is impossible to assess the correct price of any commodity or service rendered in the production of wealth. This fact introduces the element of “ finance,” in which the function of money becomes a mere inanimate factor performing the act of a medium of exchange without the power to determine the value of goods apart from their monetary value expressed in price based on the cost of production. Let us calmly reflect upon this fact. Money is a mechanical measure, but in itself possesses no power to sustain life. Its value arises solelv from its power to purchase the goods that sustain life, and the power to produce these goods arises not from money, but from the collective skill of the whole community controlled and directed by the “brains” of financiers. Production and distribution, which are two separate functions, indissolubly linked together,' are both under the complete jurisdiction embraced within the sphere of finance, but from the fact that they are different in their function and yet inseparable in their relation arises the reaction which disturbs the price level when they are not operating in harmony. That they are not at present in harmony with one another needs no demonstration. That they ought to be in harmony, should be the highest aim in statesmanship, and the summit of financial ambition can not be disputed, but democracy has no power to shed light upon the difference between sound and unsound finance, and is completely astray in its notion about (lie cause of the instability of tlic currency and the insufficiency of money in circulation, this being only proof of its ignorance of how value is established and the purchasing power of money increased or decreased by financial action. When blind passion has cooled down the mental vision will become clearer, and the true relations inseparable between work and wages will be recognised. Then it will be seen that the action of the currency upon prices arises from the action of those financiers who have the power to expand and contract (he currency, for everybody knows that the currency has no power to do that itself. That clearly indicates that it is from financial action that the disturbance arises, and it is from financial action that the disturbance must be corrected and not, from augmenting production. for that only gluts the market and reduces prices. In distribution the moral

aim is to protect the consumer against exploitation. That process demands skid in tlie judgment of value when assessing prices, and hero it is clear to every mind that the correct price ought not to exceed or fall below the cost of production, including commercial profit in the process of distribution. When an article reaches the commercial stage the cost of its production is complete, and a price above that cost is exploitation. The monetary value of an article can never ho more than the cost of producing it and transporting it to the door of the consumer. This process is not now free from arbitrary financial manipulation requiring at present much moral restraint to correct, and a will to do it stimulated by duty.— l am, etc., W. Sivertsen. October 27.