THE OTAGO DAILY TIMES SATURDAY, OCTOBER 30, 1948. MONEY FOR NOTHING

Otago Daily Times, Issue 26916, 30 October 1948, Page 6

THE OTAGO DAILY TIMES SATURDAY, OCTOBER 30, 1948. MONEY FOR NOTHING

The comments of the Leader of the Opposition on the obligation of the Government to make redress to the Reserve and trading banks for the losses incurred through the alteration of the exchange rate have placed Mr Nash in a pretty quandary indeed. The compensation is mandatory, but on the figures which Mr Nash has presented to the country there is not enough money in the public purse to pay it. What, then, are the alternatives? If Mr Nash makes these payments from the national funds he must admit the charges, which he has strenuously denied, that ( a policy of overbudgeting has enabled him to create k a large, concealed reserve. His alternative is to turn the wheels of the printing press and issue credit against Government securities for the required sum. In recent years the wheels of the printing press have been kept busy enough, as every person suffering the effects of the present inflation well knows, but it is nevertheless interesting to recall the opinion which Mr Nash has publicly expressed regarding such tactics. In his Budget speech in 1944 he said: “We ought not to create any credit when there is a shortage of commodities. It would be a crime of the first magnitude at the present time to create any credit.”

The statistics of the Reserve Bank show there have been increases of many millions in bank credits since that statement was made, yet the availability of goods has increased in nothing like the same proportion. Mr Holland, speaking in the Budget debate last August, quoted figures to illustrate that the national income advanced from £200,000,000 in 1939 to £407,000,000 in 1947, but in the same time the value of goods available had risen only from £136,000,000 to £230,000,000; in other words, the mild inflation of 1939 had developed into an acute economic disease because “a crime of the first magnitude ” had been committed in issuing credit out of proportion to the goods and services available. It is estimated that the amount of money required to recoup the losses of the banks will be £21,700,000. The law demands that this sum shall be found from the Consolidated Fund which, according to Mr Nash’s Budget figures, has no money with which to pay it. . On paper, he has no alternative but to issue credit by instructing the Reserve Bank to create £21,700,000 in new money which would be paid back to the bank through the Consolidated Fund. The effect of such a transaction would be to widen even further the gap between the money available for the purchase of goods and the value of the goods that can actually be purchased, and thus intensify the curse of inflation with which this country is already so heavily burdened.