Social Credit Column

Rodney and Otamatea Times, Waitemata and Kaipara Gazette, 26 February 1936, Page 7

Social Credit Column

(Conducted by the Warkworth Branch D.S.C. Movement of N.Z.

Monetary Committee Report

Memorandum of Dissent, [Continued from last issue]

Price Index Level.

Several witnesses introduced the idea of a price-level operatec by index numbers. Professor Irving Fisher, of Yale University is the principal exponent of this idea. It has been, and we believe is still, under the consideration ol the Gold Committee of the League of Nations. If it is sought to establish a price-level of the average of index numbers over the whole, or even a large range of commodities, the criticism that violent fluctuations could occur as between the various commodities without a disturbance of the average is valid, and none of the witnesses that appeared before us went so far as to recommend such a course ; but there is a modified method which, in our opinion, has not received sufficient consideration by the committee. The order of reference set out the desirability of examining the changes that had been made in the monetary systems of other countries. No evidence was obtained by the Committee in regard to the reconstruction of the monetary systems of Egypt, Malaya, and Sweden, but we are given to understand by various publications that these countries have established an internal price-level and have, at the same time, abolished or neutralized a foreign exchangerate, with the result that the foreign trade of these countries appears to have been stimulated rather th.'vi handicapped by the monetary reconstructions. Nor was any evidence obtained by the Committee in regard to the very great and apparently arbitrary manipulations of sterling money during the last twenty years, or to the far reaching experiments that fl.fe;i being made with sterling money at the present time... ...;: "~Yte* understand that the Egyp-, tian system has now been operating for more than nine years, and that the Swedish system has been in operation continuously since September, 1931. We are of opinion^ that this kind of proposal is in danger of being dismissed too summarily, because of the arguments that are advanced- against any attempt to fix all prices or even "to using an average of all prices of goods and services. Modification of the Swedish and Egyptian systems adapted to the conditions of.New Zealand were submitted byv witnesses to the Committee.

It seems to us to be perfectly feasible and reasonable to adopt a stable internal price-level for .those commodities upon which the economic structure of New Zealand is built.

The Guernsey Market Hail

Much interesting evidence was given concerning the celebrated Guernsey Island scheme. Details are given in the report of the majority of the present Committee, and it" is sufficient here to mention that in 1815 in that island there was a condition of unemployment and depression not unlike that in New Zealand to-day. It was proposed to build a market hall. All material and labour were available on the island,.,but not the necessary money, and the Governor, De Lisle Brock, was approached by the people and asked to float a loan in London or Paris. He pointed out that such a loan would cost 17 per cent, per annum interest, and proposed that the island should manufacture and issue its own. money for the purpose. This was done, and the money, received from rents was subsequently used to retire the money so manufactured and issued by the Governor. No evil results are recorded from this method of financing the building of the hall. This method was repeated in respect to other works until the influence of the British banking system abrogated it.

Inflation is the main allegation brought against the scheme by the majority of the present committee. History records no inflation. Inflation may depend upon the quantity of money issued, but never on the person /by whom it is is-

sued. An'excessive quantity issued by banks creates inflation's in all countries during the war. Ine much-quoted German inflation, entirely the work of the present banking system, proves, if proof be needed, that inflation has nothing to do with the source, but only with the amount of money, lo allege inflation in the Guernsey case is to illustrate the ironical saying of Major C. H. Douglas that inflation is any issue of money that is displeasing to bankers, for money issued by a local bank would have all the result of money issued by the Governor, save one—there would have been heavy bank interest in the one case and not in the other.

But we believe there is another criticism of the Guernsey scheme that can be made. There is no record of the effect produced on the monetary system of the island by the injection of money referred to, but the possible alternatives are a slight increase in the general price-level or a general increase in activity, bringing about an increase in the production of consumable goods corresponding with the increase of money in circulation. As an increase in the general price-level would have been an observable phenomenon and has not been recorded, presumably it was not that result that occurred, but the second of the foregoing results— namely, an increase in productivity. In that event the money in circulation, being that required for the increased production, would have been BETTER LEFT IN CIRCULATION, and its withdrawal from circulation would be DEFT. A - TORY IN ITS EFFECT, tending to reduce prices or check production, or both, with consequent distress to producers.

[Report continued in next issue]