MONEY AND ECONOMIC SECURITY

Otago Daily Times, Issue 25561, 14 June 1944, Page 3

MONEY AND ECONOMIC SECURITY

Sir, —Under the above heading " Financier ” writes of the farmers’ , difficulties and inadequate recompense he is receiving for the invaluable service he is rendering to our war effort, which is only secondary to the fighting services in importance. Yet all over the Dominion he is exhibiting a sense of frustration which is responsible for the continuous decline in primary production. He is the only member of the community who is not benefiting by the inflationary process taking place on account of war expenditure. He is the outstanding victim of the money illusion, as his income is anchored to 1939 prices and 1944 costs. It will only be when peace is declared that the peopie will realise the state of impoverishment the country has been brought to by the insensate policy of a Labour Government under the pretence of stabilisation. It has been continually stressed for over two years that New Zealand was a primary producing country, and should have shouldered the responsibility for feeding her army, the people of Britain and the armies of our allies to the utmost of her ability, to say of the necessity of providing stocks of food to succour the liberated populations of Europe. In spite of these warnings, we went blindly on, calling up every available man, until we could hardly feed our civilian population and men under arms. Now when the crisis comes we cannot demobilise men fast enough to stem the tide of ruin that faces us and the starving people of Europe. Notwithstanding all the complicated calculations ot Government departments, any man with ordinary intelligence knows that the 1.21 d per lb increase in the price of butter-fa „ cannot recompense the farmer for the tremendous increase in his costs during the last five years. No wonder dairy production has declined 25 per cent, and the number of cows by 100,000. The New Zealand farmer is supposed to obtain the same price for his butter-fat as the Australian farmer, but the Australian farmer also receives a subsidy totalling £6,500,000. If the same amount were given to the New Zealand farmer it would increase his return by 4d per lb. With the lopsidefd economy we are pursuing, with lend-lease loaded against us, to the extent of £40,000,000, our farmers languish, while the Australian and Canadian farmer prospers and expands his output. When the war ends we shall be under the necessity of repatriating our farmers and industry generally, because all their plant and machinery will be worn-out scrap. The plant of other countries is being maintained to meet the increased demand for goods, which we shall be unable to supply until we restore pur plant at tremendous cost. Labour, with its orthodox money system, is powerless to do anything in the matter, because the worker would have his cost of living increased, and this does not accord with union policy. Labour will never learn that it could make both the worker and farmer infinitely more prosperous if it would do as “ Financier ” suggests, and use its prerogative and take control of the issuing and retiring of money, instead of leaving it to the sweet will of private concerns, and use il to equate production and prices to the advantage of all. ” Financier ” states that if butter sold for 2s per lb in New Zealand, and Is Cd per lb abroad, the farmer could still be paid 2s per lb for the whole of his output, which would obviously not all be sold in New Zealand. Unfortunately he does not enlighten his readers how this would be done. Presumably he believed they already know. This I doubt, and the method should be stated, so that all those who place their trust in ” sound finance ” should know the technique. I therefore propose to put the position as I see it. If I am not correct, “Financier ” can correct me. The farmer, then, has produced a pound of butter for export, and sells it for Is 6d and places this amount to the credit of his account in a trading bank. As the local price is 2s per pound, he has obviously sold the butter at a loss, if 2s per pound represents the amount necessary to maintain his plant and stock and land and provide him with a decent standard of living. To make good this loss to the farmer, the Government creates a credit, free of interest, and free of debt to itself, and places it to the credit of the farmer’s account in the trading bank, resulting in the farmer recovering his costs of production, and enabling him to go on producing the next pound of butter, using up his credit of 2s in doing so. This 2s would be paid to his workers, who would spend it in living expenses with business people, or would be paid direct to a business firm bv the farmer. In either case It would be banked by the trader, in order, in 99 cases in 100, to pay off an overdraft, when the money goes out of existence, not even the banker having :t. All banking authorities of any standing agree that every advance by a bank, and every purchase of a secuiity by a bank, creates (new money) a new deposit. And every repayment of an advance to a bank and every sale of a security by a bank, destroys (money) a deposit. So that practically all money in existence came into circulation as a repayable debt, bearing interest to the banking system. Consequently the 6d credit created by the Government and paid to the farmer is cancelled out in the next cycle of production and cannot lead to inflation. The issue of the Gd in the first place was not inflation; it simply made up the cost of production. Money should be created for production and cancelled in consumption, and we cannot have inflation until there is more money than goods on the market. This is believed to be the system used by the Japanese to finance credits abroad to-pur-chase raw materials and old ships, which thev are now presenting to us for nothing. I am etc., Another Financier.

[This letter exceeds considerably the limit of space which we can make available to correspondents. While this subject. is of public interest, we must ask writers on it to state their views concisely. Otherwise we shall be obliged to close the correspondence.—Ed. O.D.T.]