CURRENCY REFORM.

Taranaki Daily News, 16 January 1933, Page 2

CURRENCY REFORM.

(To the Editor.) Sir,— Every political problem is capable of solution. Any ill the body politic is heir to is man-made, and is the result of incapacity or mismanagement. During the last few years the National leaders the world over have had everything in their favour. There have been no wars, plagues, pestilence, blight, droughts or scourges of any description. They have had full and untramelled control of the economic wheel. Yet they have run ashore and almost wrecked every financial ship on the ocean of commerce. No two agree as to the cause which brought about the disaster, nor can they offer any suggestions that will prevent repetition in the future. So under the circumstances the time may not be inopportune for the man in the street to express an opinion. For whatever course of action he might suggest he would certainly have this in his favour—that he could not make a bigger hash of things than the alleged heads have done.

But the present is not the time for recriminations. Unless civilisation is to revert to savagery some solution of the problem will have to be found, and the thing for our mutual consider? tion is to discover the solution. Before setting ourselves to look for a thing it might be well to know what we are looking for. For even most diligent search for nothing in particular is unlikely to lead to fruitful results. Broadly the supply of man’s physical wants come under three headings—wealth, its production and its distribution. There is no shortage of wealth as represented by raw material, nor is there a shortage of wealth as represented oy the manufactured commodity. So this brings us to the third factor in social welfare—distribution, or in. other words, currency. The claim that the absence of gold is the cause of our trouble is somewhat untenable. Things are just as bad in gold-gorged America as they are in me-tallic-hungry Europe. The solution appears to lie in some method of currency manipulation that would hold local price levels above world parity, without reversion to a depreciated currency. When I refer to currency I mean the actual circulating medium as distinct from credit. Credit is a matter as between the banks and their clients, or as between contracting parties, and has nothing to do with currency proper, the working of which affects every man, woman and child in direct manner. The workings of the/ various monetary systems adopted by the different Countries throughout the world during the last 150 years has demonstrated one outstanding fact, which is that the only way to stop the value of a commodity is in terms of something more valuable than itself. The presence or absence of gold has no effect upon world values. World parity is the base of all value, and whether such parity is 25, 50 or 100 points away from gold is immaterial. World parity and not gold is the base. The acid test of a currency is what you can get in exchange for it, and provided the monetary unit in circulation in the Dominion is maintained at parity with the currency unit for which our exports are exchanged on the world market, then it follows that our currency unit carries a world parity

which equal its Dominion value as a circulatory medium. The myth that gold was the basis of value was exploded when Britain went off the gold exchange standard. The -value of gold jumped from four to six pounds per ounce overnight. But commodity values remained as before. It certainly took six currency units to purchase four gold units, but the purchasing of the currency unit in relation to commodity was unaltered. Had there been a shortage of commodities price levels would have risen irrespective of whether the exchange medium was gold or sterling. World parity is the base of all commodity value. The importer buys in the same currency in which the exporter sells. Goods pay for goods, and provided the trade is a live one, and the currency unit of the trading countries possess the same value, gold plays no part in the transactions whatever. Now if we accept world parity as a base for the unit, I think we are within measurable distance of solving the problem of price stabilisation. Assuming the Dominion wage sheet to be £15,000,000 annually, I would suggest the following plans:—(a) that afi. wages be paid in commodity certificates, such certificates to take the form of promissory notes of suitable denomination redeemable in standard currency in five years from date of issue; (b) that such certificates be made legal tender, but be made non-negotiable for oversea credits or mortgage redemption, and operate only in relation to wages and commodities; (c) that they be purchaseable only from the Department of Public Issue, at their face value, and that they be exchanged only in amounts of 500, or multiples of 500, in ordinary currency before date of expiry; (d) that the money with which they were purchased be immediately paid into an account termed the currency stabilising account, and be held against the redeemability of the note at date of expiry; thereby guaranteeing the face value of the note from date of issue; (e) that the interest of credits accumulating at the Central Bank be paid to the primary producer in the form of an export bonus, the bank to be prohibited from investing the credits in other than Government bonds or advances to local bodies.

The effect of the various proposals would be as follows:— (a) the wage and commodity sheet would duplicate itself annually, and in five years there would be a wage and commodity pool of £75,000,000; (b) that once the certificates were in the pool they would remain there, and being non-negotiable for oversea credits or mortgage redemption, they would be immune from the attentions of the currency hawk and the land gambler. If either of these wished to operate they could still do so, but they could not take money from the bread and butter pool to do it with; (c) would enable a business man who found himself in need of oversea credit to convert sufficient of his certificates into standard currency to meet his wants. But being convertible only in amounts of 500, this would keep the unit in the pool. Since the office of Public Issue would, immediately resell them, the pool would regulate itself; (d) would guarantee the face value and redeemability of the note from date of issue, and its value as a bond would equal its value as a currency unit The unit being based on world parity, the pool would have an Empire commodity purchasing power of £75,000,000; (e) that no strain would be put on the bank currency, as the bank would only be called upon to honour its currency in the form of credit when returned to it, and there, so far as the bank’s currency was concerned, the matter would end for five years. The effect of the proposed fund upon price levels is a matter of multiplication. If butter, for example, were worth 9d per lb. under a wage sheet of £15,000,000, it should be worth 2s 3d per lb. under a wage sheet of £45,000,000. The rise in all price levels would only be limited by the value of the pool, and even 300 per cent above world parity would be no idle dream. I claim to have some knowledge of the -world’s monetary history, and this is the first time that price stabilisation by multiplying the unit has been suggested. The world’s monetary scrap heap is composed of split unite, and their monetary scars live through the ages. But I have 75,000,000 reasons for believing that what I propose, will be a success, and each one is a sound monetary unit I am, etc., FRANK BELL, Midhirst, January 13.