INFLATION AGAIN

Southland Times, Issue 21771, 28 July 1932, Page 6

INFLATION AGAIN

A correspondent seeks to escape from the sting of inflation by discriminating between “inflation” and “over inflation.” Other people use the term “reflation” to describe the very thing he advocates—an issue of paper money to bring prices back to their former level. If it be assumed that this is possible, and that the “reflation” can be halted at the desired point, the effect of increasing all prices to their 1928 level will be to intensify the difficulties of the primary industries, because the costs of production will rise. Inflation by means of an artificial increase in the rate of exchange has the same effect, but it gives the primary producer a temporary bonus at the expense of the rest of the community, and this bonus is later paid for by the primary producer himself. Inflation by a note issue, no matter what schemes of redemption may be introduced to “take out the sting” will raise prices, and the farmer will pay more for everything he has to buy and use, while actually he will receive no more for his products. If our correspondent would study the course of events in the French Revolution when notes had a specific security, and of the post-war conditions in Germany, he will see that the rise of prices penalized the poor people and kept increasing the burden because the process of inflation could not be stopped. A rise in the prices of our exports is of benefit to us and the whole Dominion will be better off —a rise in the internal prices without a rise in external prices cannot really benefit this country, because all costs will go up. The Guernsey operation imposed its heaviest burden on the poor. A

cynic might say that when the Governor introduced his scheme he was not a fool, because he relieved himself and the other well-to-do of a burden which otherwise would have been borne by them alone.