“PAY AS WE GO”

Otago Daily Times, Issue 23955, 2 November 1939, Page 10

“PAY AS WE GO”

TO THE EDITOR Sir,—Your second leading article of to-day’s date under this title, animadverting upon the speech of Mr J. A. Lee to his constituents last week, seems to be framed upon the following assumptions:— (1) Financial institutions should be seperate from and superior to State departments—“ legislation that has been passed this year reducing the Reserve Bank to the level of a State department.” Since common sense tells us that money commands all our economic activities, this implies that the people through their representatives should not be sovereign but should be subordinate to those who control the financial institutions. What about Edmund Burke’s assertion that “unless the people possess mediately or immediately the power to grant their own money, no shadow of liberty can subsist yt ? (2) The money system as at present understood and operated should not be altered or interfered with. It gets us hopelessly into debt, it treats us to booms and slumps, it keeps the majority of us in poverty and insecurity in the midst of potential plenty, it produces and intensifies internal friction and leads to war, but we should not alter or interfere with it. It is like a motor car which stalls every time we try it on even a modest hill, which lands us periodically in the ditch and may at any time send us up in smoke, but we must not get it mended or try to ride in any other. . . “It would be with serious misgivings,” says the articles, “that intelligent members of the public would view any incursion by it” (the Government) “into unexplored avenues (with regard to finance). Yet “if the Government possesses any sovereign formula by which the war may be financed, etc., the public may justly claim to be taken into its confidence.” I hesitate to assess the degree of intelligence to be found among “members of the public,” but among leader writers on finance it does not seem to be high. It does not appear to have grasped what is by now a fact so oft repeated as to be trite, namely, that the manufacture of money in the form of credit is a process carried on by the “ not very arduous activity of writing figures in books ’ and that it has been filched from the State to which it properly belongs by the financial institutions. See the evidence of Mr Graham Towers, Governor of the Bank of Canada, recently published. And it persists in trying to frighten the unintelligent members of the public by harping on the word “ inflation as a term of dire and dreadful significance, without any clear indication of what it means by inflation. As a matter of fact inflation would be no worse a method of making us pay for the war than taxation. Is it any different to be made to pay more for things, out of your income, from being left with less of your income (by taxation) wherewith to buy them. By the way, was it not in 1923 that the head of the American banking house of Kuhn Loeb and Co told the members of the Canadian Club that they (ie the bankers) had now got everything in hand and there was nothing more to fear ” ? Nothing to fear—with 1929 and 1939 still ahead! The same year Douglas told the committee of the Canadian House of Commons that they had no alternative under the present system than progressive inflation or a perfectly unmanageable unemployment problem. “ Pump-prim-ing” by means of public works and

armament programmes is the de facto verification of his assertion. The present system must have inflation, in some, form, i.e„ the injection into it of extra money through some channel, in order to keep going at all. Watch what happens when the banks begin to refuse further advances. What your leader writers object to is any interference with the claims of the banking system to put the public in its debt for every penny of money thus injected—and for every penny of other money as well. They will wake up to find themselves very far in the rear of the “intelligent members of the public” who have long since realised the nature of the knot that is them. We shall “ pay-as we go ” lor the war—in lives and goods. Why must we also be made slaves of in perpetuity, by debt, for the uSe of “ the counters to deal with them" ? —I am, etc., • Truth. Dunedin, October 30. ' V ; ,