REDUCTION OF SUBSIDIES

Otago Daily Times, Issue 27391, 17 May 1950, Page 8

REDUCTION OF SUBSIDIES

Sir, —Your correspondent “ Yeoman ” asks how “an issue of money to the people, as and when required, without debt or taxation,” differs “ from Mr Nash's policy of creating credit through the Reserve” Bank ” as a solution to the “ problem of rising costs." The problem should perhaps be stated in more precise terms. It is the problem of supplementing the purchasing power of the individual without adding to costs, thus breaking the vicious spiral of costs and prices, and 1 might point out to “ Yeoman ” that the very wording of the above sentence carries the answer to his question. Mr i\ash did not issue money to the people free of debt or taxation. What he did not collect from the people in taxation at once he instructed the Reserve Bank to create and issue as its own property, a debt which the people of New Zealand owed to the bank, and which—l have Mr Nash's own word for it—should at some time or other be repaid to the bank with money collected from the people through future taxation, interest being presumably charged in the meantime. Neither did Mr Nash issue such money “ as and when required ” to meet the shortage of purchasing power, since his fixed prices and, therefore, the amounts of his subsidies, were purely arbitrary, having no relation to the facts of production and consumption, facts which had no place in Mr Nash’s yearly Budgets any more than in other State "documents of that kind. Such an issue of money as we contemplate implies a proper system of national bookkeeping, such as we have not yet introduced, with a national ” credit account, profit and loss account, and balance sheet; it implies also a recognition of the obvious but neglected fact that the credit of the nation belongs to the people, not to the book-keeping institution that writes it up, and should be available to the people “ as and when required,” on loan to producers and traders, but free to finance consumption or provide for the extension and improvement of national assets. There is an ample literature on these subjects, which genuine inquirers can and should study.—l am, etc., Dunedin, May 15. Truth.

Sir, —Your correspondent " Wilfred ” will find that the Oxford Dictionary defines inflation as “ to raise prices artificially." Rent, interest, and profits being the chief artificial additions to costs, it follows that for these to be recoverable money which is unrepresented by costs must be injected into the system. If such injection is made by the creation of assets such as houses or hydro-electric systems no serious harm results. At the moment ■such injection is being made partly in the highly-inflated prices being paid for wool and the absence of any suggestion by the Government to skim off the larger part of these “ artificially raised prices ” clearly indicates that it has no intention of limiting the much-condemned inflation or that it is unable to recognise It as such. Subsidies, on the other hand, are deflationary, and act as a counter-weight, and by their action in knocking this out the Government has aggravated the situation they were elected to rectify. If the country is classed as a sl»ip of State the passengers are due for a bad spell of sea-sickness, due entirely to the faulty steering of those in control in failing to keep its head to the wind.—l am, etc., Ivan E. Sutherland.

Sir, —It is-hard to follow the reason of the Government increased loan to ex-ser-vicemen. First Labour were condemned for building too expensive houses; secondly, it will take most of the increase to catch up with the rising costs, £SOO more to carry, and the increase in living costs. The situation is Impossible. Mr Holland, in his pre-election speech, stated that he would lower the cost of living, and he definitely would not reduce wages. Where is the difference between reducing wages and reducing the purchasing power of wages? Mr Holland stated that 4 per cent, would cover the cost due to the removal of subsidies. How he arrived at those figures would be hard to know. He might guess, but the cost, is still rising. " I Wish ” stated that the removal of subsidies would be a good thing, as it would cause a surplus of labour, which would mean a slump. •• I Wish ” evidently is too young to remember the depression or is a capitalist, and the worker’s troubles would not worry him. He says that a 44-hour week would be a good thing. X say 48 would be better. It would again bind the workers together and prevent Oppression. Why take subsidies off bread and give the farmer subsidies to grow wheat? Why pay cartage on lime to farmers and raise railage to the public? With the high price of farm produce today, surety the farmer can live without the help of the public.—l am, etc.. Just An Opinion.