COSTLESS CREDIT

Otago Daily Times, Issue 23886, 14 August 1939, Page 11

COSTLESS CREDIT

TO THE EDITOR

Sir,—lf " Countryman " would kindly refer to my letter in your columns of August 2 he will find the answer to his inquiry on " the financing of industry " under social credit. Regarding inflation, this is such a bogey with economists and such a parrot cry with their dupes that I had better explain in the simplest possible language what it means. On an altogether barren island money is worth nothing at all. Suppose a man is cast away in such an island with a golden sovereign as his sole possession, if presently a trader comes along with nothing to sell but a penny roll, he can (leaving out humanity, since business is business), demand the whole pound for it. The pound therefore is worth a penny; it is inflated. This is the kind of inflation that would occur if we try to solve our problems by merely coining money without reference to goods. Our money would lose value because it would have little purchasing power. The Douglas proposals present an equation between consumption and production, no more and no less, and there should be no difficulty about that. With regard to the Albertan experiment I would direct " Countryman " to an article in the columns of this paper bv Mrs S. Townend entitled the " Truth About AJberta" date June 24. This article is very informative and shows that, notwithstanding the opposition by the Canadian Government, the Albertan Government has by no means been thwarted, and has recently devised a method to increase purchasing power by the issue of Treasury vouchers, and this is proving increasingly successful. Statistics showed that Alberta was now one of the most progressive and prosperous provinces in Canada. The fight is on. and will continue until sovereign rights are restored in Alberta.

In the event of obstruction in New Zealand by the banks, I can see only one principle of effective action (though its possibilities of an application are of course many) and that is, first to find out and to realise what are the underlying facts, not the superficial results, and then by every possible means to put those facts before as many responsible people as one can. Let psople know these facts which the international usurers do not want people to know —call the attention of members of Parliament and ask them to do something, that we will not be made the bond slaves of international bankers; stiffen the will and determination of the people and we must win out. New Zealand can produce all and to spare, food, clothing and shelter required.

"Countryman" desires the meaning of credit as used by monetary reformers. Everybody knows that the banks both borrow and lend money, and it is common belief that the money it lends is the money entrusted to it by its depositors. This is not true, Notes and coins form but a small proportion of our money to-day and are used by the banks as till money. Some people put it down as low as 1 per cent. The vast bulk of our money consists of what is known as bank credit. In the often quoted words of Mr R. McKenna, chairman of the Midland Bank, "Every bank loan and every purchase of securities by a bank, creates, a deposit; and the withdrawal of every bank loan and the sale of securities by a bank destroys a deposit." The meaning of this is that when a bank lends money it does not part with any it has. At least/ 90 per cent, of all business transactions to-day is car* ried out by cheque and involves nothing more than a transference of a a figure from one ledger to another. There are no inexorable laws of political economy. We are kept in a muddle by the. inflexible mind ;of political economists and their dupes. One of these gentry arrived in Auckland last Monday by the Aorangi. Sooner or later, he says, "We will get a rude awakening, etc., etc.," —all to play on the susceptibilities and credulity of the. uninitiated. Mr Montagu Norman, Governor of the Bank of England, at the Lord Mayor of London's banquet to the city bankers at the Mansion House on October 20, 1932, in the course of his speech, said: "The difficulties through which we are passing are too great. ... In spite of every attempt that has been made, the vast forces of the world, the herd instinct, the desperation of the people who have neither work nor markets, have brought about a series of events and a general tendency which appears to me at the present time to be outside the control of any man or any Government. The difficulties are so vast, the forces so unlimited, so novel, precedents are so lacking that I approach this whole subject not only in ignorance but in humility. It is too great for me I must admit; for the moment the way' is not clear," What a confession of: futility! Blame forces, blame ten-r dencies, blame the herd instinct (called patriotism in war time), blame anything but the financial system, the one force that is really outside the control of any Government! That alone is free of responsibility for a financial, muddle. Mr Montagu Norman is the financial adviser of the British Government and the way is not clear to, him.—l am. etc., New Truth. . Dunedin, August 11. [Correspondence on this subject will have to be rejected if the writers of letters do not express their views more concisely.—Ed., O.D.T.J