COSTLESS CREDIT AND POLITICS

Otago Daily Times, Issue 23882, 9 August 1939, Page 5

COSTLESS CREDIT AND POLITICS

TO THE EDITOR Sir, —The meaning of the word credit, as used by monetary reformers, is at times rather confusing. " New Truth," in reply to my inquiries for some light on the working principles of costless credit, presupposes that I will agree that all credit is costlessly created. If b/. refers to bank loans and overdrafts, and does not include fund invested by private individuals from savings, I am inclined to agree. Banks perform a very useful service in providing finance for the expansion of trade, but unfortunately they contract or withdraw their credit in a period of depression, and by so doing accentuate the people's difficulties. I take it that monetary reformers do not wish to take away from the banks their traditional function of providing credit or loans, but that their object is to establish some additional. form of credit, which is free for all, so that purchasing power may be increased arid the general standard of living raised to a higher level The objective is a very worthy one. The chief consideration, however, is whether or not the scheme will cause inflation, and I do not think we have had sufficient evidence on this point. There is no precedent as yet to go by. That there will be strong opposition from financial interests thera is no question. I. am disappointed that Douglas advocates have given no information yet on the Alberta experiment.

The farming industry in New Zealand has now reached such a pass that some change in the State financial policy is urgently necessary. For many years the farmers hava carried the secondary industries. It is not to be expected now that secondary industries can carry the farmers. Two alternatives only are open to the Government, either to live within its means or else to try some bold financial experiment which may possibly involve the. country in ruin. The. first means an allround reduction in costs, a lowering of wages, repeal of the 40-hour week, diminution of public works spending, and reduction of taxation. Such a programme would be highly unpopular, particularly with the town workers, and it is most unlikely that the present Labour Cabinet would consider it for a moment. But neither orthodox Labour nor Nationalists are bold enough to try the second alternative, and we can only look towards the Left Wing of Labour for an" such action. Labour's present policy is in any case likely to bring the country eventually to ruin. We are gradually drifting in the same direction as Newfoundland. I personally would welcome a trial of the Douglas plan rather than a continuation of the present policy which discriminates so inequitably against rural interests.—l am etc.: Countryman. Middlemarch, August 7