EXCHANGE PROBLEM

Poverty Bay Herald, Volume LIX, Issue 17951, 1 December 1932, Page 12

EXCHANGE PROBLEM

(To the Editor of the Herald.)

iSir, —“Opulent Farmer,” in your Wednesday's/ edition, contributes an example of bis sarcastic penmanship m which he derides your policy of opposing a high rate of exchange. As he recognises, a raising of the exchange rate is apparently merely equivalent to an inflation of the internal currency of the country. However, there is a difference. If the currency be supplemented by a national issue of Treasury notes, these notes could be used for the relief of unemployment and the completion qt our unfinished public works. _ But, if the exchange rate is artificially increased no such national development would eventuate. .Moreover, a direct inflation of the currency would naturally raise the rate of exchange. The effect if the rate of exchange were raised, say, 40 per cent, would bo this: The farmer or exporter would receive £l5O for every £llO he received before. 'lbis' would represent an increase of 36 per cent, of money in circulation. According to the quantity theory of money the price of commodities is diroetiy proportional to the amount of money in circulation. Hence the price of all commodities in New Zealand would rise 36 per cent. This would enable the importer to pay his extra exchange and (consequently no drop in imports would occur. The effect of this inflation would he to loosen the stranglehold which the money-lender has obtained over the producer ill this country and in every other country. In the preceding prosperous period each unit of money hail less exchange value than at present, but the number of units which must be repaid although their value has increased re mains the same. The result of inflation would be again to decrease the value of each unit and let the borrower when the time comes pay back the equivalent of what he borrowed. However, these little remedies which may bo applied to restore prosperity are after all only palliatives. They do not go to the root of the evil. “The prosperity of a nation can never be measured by abounding business and big profits for the few, but only by the diffusion of wealth equitably amongst the people as a whole.’ The chief cause of the maldistribution of wealth is the institution—a legacy of the Roman Empire which it destroyed—of private property in land. Until the land of this country is nationalised this country will never enjoy that full measure of healthy prosperity and freedom which, it is the light of every citizen to inherit. —I am, etc., ' R.A.P.