The Timaru Herald WEDNESDAY, FEBRUARY 24, 1909. STATE PAPER CURRENCY.

Timaru Herald, Volume XIIC, Issue 13837, 24 February 1909, Page 4

The Timaru Herald WEDNESDAY, FEBRUARY 24, 1909. STATE PAPER CURRENCY.

The Farmers' Union at Paliiatua on Monday condemned the Hon. A. W. Hogg's recent statement as to his being favourable to the State issue of money as a "wild-eat scheme." This refers to some remarks made by the new Minister of Labour at Wanganui a fortnight ago, in reply to a deputation who urged that the Government might issue its own paper money and use it to pay for public works. Mr Hogg said he was entirely in sympathy with the deputation's views, that other Governments had used a State issue of currency with advantage, and lie would do all he could to help the matter along. The Hon. J. Rigg spoke to somewhat the same effect a fortnight earlier, but more fully, as he gave an address on the subject to the Wellington Trades,and Labour Council. There are eases on record in which an issue of paper money has been advantageously used for the purpose of getting specific public works carried out; but there are still more histories of great disasters having been brought about by excessive issues of paper money. The successful cases should be sufficient to save a general proposal of the kind from being condemned as a "wild-cat" scheme; whether it would be "wildcat '' or not depends upon its conditions. Mr Rigg, in saying that a State note issue could be justified, added .(according to the report of his address in a Wellington paper): "It would be necessary to limit the issue to a certain extent within the revenue of the country, and within [by] the consideration of the rapidity of circulation." A scheme for a State paper currency which rigidly observed these too limitations would not be a wild-cat scheme. Many people have advocated

:;ach schemes from time to time in New Zealand, and most of them seem to have greatly exaggerated the amount of benefit that could he derived from them. Mr Eigg seems to do this, when lie makes one limitation the amount of the revenue of the country ; though he adds a second limitation which cuts down the first tremendously. It is quite easy to show that within this reduced limit the issue of State paper would he perfectly safe. The limitation of revenue only would be, say, ten millions per annum, and if so much paper could circulate among the people for a whole year, as between Government and people, then that amount could he issued. But the whole of the note circulation of the Dominion does not average much more than a million and a half,' and of course a. large proportion of that

does not circulate between Government and people. Tlie note circulation is the measure of the amount of paper money which the people find it convenient to use, and they would not use more, however many bales of paper were converted into State notes. The. State notes would have to compete with the notes of the hanks, and there would be no preference for either, unless the State refused to accept bankers' notes in payment of taxes or for services rendered, and even tin's would not lie sufficient to oust bank notes from the field, if these were given fair play. What the average circulation of State notes would he, if competing with bank notes, it is impossible to say, but it must bear some such proportion to the animal revenue as the present note circulation bears to the volume of the annual business of the country. If the use of other notes were forbidden, the State notes would probably circulate to the amount of a million and a half, and the effect of this would be a, forced loan from the people to that amount; the Government would get goods or services in return' for notes —promises to pay which would never be redeemed. Eacli individual promise would be redeemed, but it would be replaced, somewhere,by another. And this would be the, case with whatever amount the State note circulation might average. There can be no question that within limits a State issue of notes would be perfectly safe ; no question that the amount of notes paid out per annum might safely amount to the total amount of revenue of the country per annum;, but while on the one hand the State notes were being given out, monthly, weekly, v daily, in payment of salaries and wages, and for services and goods, on the other hand they must be taken back, monthly, weekly, and daily, in payment of taxes and for services rendered; consequently, as the notes would serve again and "again for such exchanges within a year, the total amount in circulation at any time could be but a fraction of the annual revenue. The idea is however prevalent to some extent that State notes could be safely issued for the prosecution of public works, for advances to settlers, for the purchase of estates for settlement. This was the idea; of the Wanganui deputation, concurred in by the Minister of Labour. The foregoing consideration of the limits of the safe issue of State notes for payments from the consolidated fund, shows that there could be no safe issuo of State notes for such purposes, unless each note was made "as good as gold" by the limitation of the total issue per annum to the total revenue, plus, for' one year only, the average amount of the notes in circulation. In other words, there could he no safe or allowable issue of notes to pay for public works, etc., unless there was a corresponding increase of revenue over that required to meet other forms of outlay; in other words; an increase of taxation, in payment of which the State would receive the superfluous notes back again. The State does not require a .gold basis for its paper eur< rency, it is said. This is correct? i provided it can make the currency Kood through haying .tlie.right,to claim from the public its total face value in return for services rendered and pay* ment of taxes.