The Daily News. THURSDAY, OCTOBER 27, 1921. FINANCIAL EXPEDIENTS.

Taranaki Daily News, 27 October 1921, Page 4

The Daily News. THURSDAY, OCTOBER 27, 1921. FINANCIAL EXPEDIENTS.

History records many notable instances of the desperate methods adopted by nations to overcome financial difficulties, yet there is no case on record in which success was achieved except by legi tiinate means such as taxation and loans. No marvellous juggling or wizardry will do aught but. temporarily hypnotise or deceive, leaving a day of reckoning or adjustment inevitable. Readers of Carlyle’s French Revolution cannot fail to be struck with the important part which financial ex-' pedients of the grossest nature played in that colossal upheaval. The inability to provide the wherewithal for carrying on the administration of a country without squeezing the life-blood out of the nation has wrecked many an administration and led to not a few upheavals, and yet the lesson of honest finance has not been assimilated. Take, for instance, the example of the Russian Soviet, with its seizure of public and private funds and property. What has been the result? Poverty, disease, and a famine that is decimating the country. The money has vanished, or is merely represented by valueless paper which had made barter the means of exchanging commodities as in primi» tive times. As a nation, Russia is hopelessly bankrupt, is down and out. There is money in Germany, but it is mostly held by a few profiteers; the value of the mark is a negligible quantity, and may even disappear in toto, as a worthless scrap of paper. The Hamburg bankers, however, have hatched a startling scheme for the creat’on of a new mark, valued at a shilling, and having the security of the State, but its use is to be confined to paying for imports and facilitating foreign trade, the old paper mark to remain current in Germany. Getting down to bedrock, money is a token of intrinsic value, which is subject to fluctuation and debasement. When it was found that in international transactions the use of actual specie involved a loss of interest and 1 a risk of still more serious loss, a paper currency based on credit offered the readiest solution of the difficulty, hence the institution of bank notes, bills of exchange, warrants and cheques, convertible, if desired, into standard coin. The important point to note is that this system was based on credit and protected from adulteration, but there are eases in which State issues of base money were circulated, the last of such, curiously enough, being made by a petty German prince early in the last century, the offence being aggravated by a refusal to redeem the money at its nominal value. Tn. view of these facts some conception can be formed of the merits and demerits of the Hamburg bankers’ scheme. Manifestly it is primarily intended for dealings with America, but it is obvious that, whatever value the Germans may place on the new mark, American financiers —or others—are not’ likely to accept it at, any price but that which they deem prudent to place upon it. Creating a dual separate currency for internal and external trade cannot appreciate German credit, nor eliminate the risks inherent to the scheme. The expedient may be astute, but is none the less an expedient, and, as such, is hardly likely to succeed. Germany is too unsettled and too much burdened with debt and liabilities to play tricks in high finance with any prospect of stabilising a currency that is now at almost the lowest ebb. The subject of financial expedients is one with which-probably every country has more or less concern. New Zealand is by no means free from the evil. The disappearance of last year’s supposed surplus is a case in point. It is now admitted by the Premier that it was not an actual cash surplus, but included assets. How, then, was it arrived at after merely deducting expenditure from revenue? If there is one thing likely to cause uneasiness it is juggling with a national trading account. If there is to be I a balance sheet and profit and loss account well and good, but so long as the Budget is supposed to be /waifiiied to revenue and

ture, any surplus shown should be actual cash. No doubt the money has been properly expended, but the Dominion’s credit will not be improved if surpluses are inflated. There is just one other point deserving of notice and giving rise to an ample field for speculation. When Mr. Massey recently intimated the economies that had been effected, he mentioned that, by using ordinary revenue, instead of borrowing, £888,750 had been saved. Manifestly if money is available in the Treasury there is no need to borrow, and it is evident that if this method of “saving” is to become general it will be a case of taking from Peter to pay Paul. Needless to say that if this process were followed by business concerns disaster might be expected to follow, as there would be no money to carry on with. What the public would like to know is the exact amount of money that has been saved to date, and how much the retirement of civil servants is costing the country in pensions, gratuities and increased salaries to their successors. The Government has everything to gain by taking the people into its confidence, by refraining from expedients, and not allowing the country to be misled by figures that convey wrong impres-’ sions.