The Christchurch Star PUBLISHED BY New Zealand Newspapers Ltd. TUESDAY, JANUARY 16, 1934. LEADING TO CATASTROPHE.

Star (Christchurch), Volume LXVI, Issue 20205, 16 January 1934, Page 6

The Christchurch Star PUBLISHED BY New Zealand Newspapers Ltd. TUESDAY, JANUARY 16, 1934. LEADING TO CATASTROPHE.

TV/COST PEOPLE will agree with Mussolini that although American monetary manoeuvres must not be judged hastily, inflation is a road leading to catastrophe. An able American economist, Mr Garet Garrett, emphasised this point when he asked what people would think if the Government attempted to restore a nation’s prosperity by changing its weights and measures. Assuming that the Government, on behalf of the wheat farmer, decreed that the half bushel should be the legal bushel, on behalf of the cotton grower that eight ounces should be the legal pound, on behalf of industry that eighteen inches should be the legal yard, and on behalf of labour that thirty minutes should constitute the hour, the effect would merely be that prices per bushel, pound or yard, and wages per hour would immediately fall until the old relations prevailed, except of course with those who were lucky enough to have made contracts beforehand to deliver wheat at a certain price per bushel or cotton at a certain price per pound. One important reservation, too, he emphasised, that with weights and measures subject to change by political decree, chaos would fall upon business. In fact, he submitted that any Senator proposing to increase everybody’s income and restore prosperity by halving all weights and measures would not be taken seriously, and to propose the halving of the money measure for the same reason was only to indulge in a delusion upsidedown. In the first case prices would fall; in the second case prices would rise. Thus the economic state of the nation would not be changed at all, except that those lucky enough to owe money would be immediately benefited at the expense of those to whom the money was due, the creditor being obliged by law to accept the exact number of dollars lent notwithstanding that the value had been halved by decree; and except, too, that with the value of money or the money standard itself subject to change by political decree, there would be chaos in the world of credit and capital, and no obligation or contract would have a definite meaning. SOLD IN THE DOLLAR. 71/TR ROOSEVELT’S recommendation of a “ minimum cut ” of 40 per cent in the gold content of the dollar, and his unreadiness to fix the exact value of the dollar must deepen the uncertainty upon which he bases his marking-time decision. The nationalisation of the gold supply makes matters worse. We in New Zealand have seen how much obloquy may attach to the business of manipulating money standards, for the credit of the country has been called in question in London over, the value of New Zealand money in respect to Auckland and Invercargill borrowing. Strictly speaking, there should be nothing more sacred about the bushel measure than the money measure. Prices will rise and fall perplexingly under any system of currency, but an artificial adjustment of the money standard undermines national confidence to an insufferable degree. With inflation the rise in price is illusory. Goods are not rising in value, but the %’alue of money is falling. During the German inflation when the price of a simple dinner in Beilin might have been 10 million marks, the food was absurdly cheap, provided the diner had a piece of silver or gold or any kind of good foreign money to tender in payment. Mr Garrett’s conclusion, a perfectly sound one, is that as soon as the illusion disappears, when goods are rising in value, there is a flight from money to things, and finally a panic to be rid of money, however fast the Government prints it, to exchange it for. anything before its value is utterly gone.