ECONOMIC AND FINANCIAL SYSTEMS DIVORCED

Waikato Independent, Volume XLIV, Issue 6075, 11 July 1947, Page 4

ECONOMIC AND FINANCIAL SYSTEMS DIVORCED

TEE EJDITOE’S COMMENT.

As we mentioned in our last issue there is no time now in the House of Representatives, or out of it, for political “mud-slinging,” for there is much to do in this Dominion of ours that is vitally important to the immediate and future smooth-running of the country. There are a number of pressing problems to overcome and one of them is the need to get back to something of a stable price level and to put a stop to a' policy that is causing a veritable divorce between the economic and financial systems of the Dominion. It is a fact that our so-called prosperity of the present has an actual fictitious value. It is true there is i plenty of money in the country, but it has become increasingly recognised that we cannot go on creating additional money and that a more serious effort will have to be made to stabilise our internal economy. It will surely be remembered that when the general election campaign was at its height, it was admitted by both political sides that this principle was sound and they tacitly agreed that industrial expansion should be equated with monetary expansion, and that credit and currency should be issued and controlled so as to maintain a stable price level. On this vital subject H. J. Kelliher, managing director of Dominion Breweries Ltd., made another-waluable contribution when he spoke to the company’s annual meeting a few days ago. Mr Kelliher is recognised as one of our soundest businessmen and it would be well if immediate heed were given to the advice which he has again offered. / Mr Kelliher points out that with three and a-half times more money in cinculation to-day than in 1939, and with far less consmer goods and raw materials, as well as less efficient services, with which to usefully exchange this money, it is glaringly obvious that something is radically wrong with our internal economy. He contends that if there was an excuse for monetary inflation during the war years, the first aim and objective of our post-war policy should have been to call a halt to the creation of new and additional money, and to stabilise our internal price level and the cost of living generally on a basis that would ensure full-time employment and a reasonable standard of living. “Tfcs logical remedy was not to intensify the control and regimentation over the manufacture of goods and commodities, but to control effectively the issue of credit and currency and thus stem the inflationary trend and the dangers arising therefrom. But instead of trying to balance our lopsided economy, the manufacture of money was actually accelerated. Even as late as the first four months of the present year another £9,000,000 was added to an already flooded money supply. On the other hand little wa§ done to accelerate manufacture and production.” Mr Kelliher goes on to point out the loss of production through industrial unrest and emphasises that the restrictions on the. importation of capital and consumer goods, as well as raw materials, is neither sound nor justified. He also mentions that our overseas funds have, reached such an amount that they are now an actual embarrassment to Britain’s economy. Mr Kelliher contends, with much soundness of thought, that the policy adopted at present is doing the very thing its advocates hope it will not do and that prevent a repetition of previous depressions. He says: “I have always contended that a stable internal price level is the fundamental solution to our economic problems and difficulties. Strikes, constant demands for higher wages, and the industrial unrest we see in all directions; loss of production, loss of purchasing power, lack of incentive and enterprise; unemployment, class hatred, high taxation, as well as both inflation and deflation—to one and all the answer is the—promotion and maintenance of a stable internal price level of goods and services, which in turn means a stable purchasing power for our monetary unit.” We agree with Mr Kelliher that mere lip-service will not achieve so vital an objective and that the time is right at hand in the present session of Parliament when the people should demand of their representatives that adequate steps be taken to safeguard them against the dangers that w.e have to fear from a further period of deflation. Is it not a fact that both the political parties subscribe to the key principle of controlling credit and currency with a view to preventing inflation and deflation and maintaining internal stability? The unfortunate thing is that so far no real attempt has been made to carry out the promises made prior to the general elec.tion. Public opinion will have to be

more directly and more emphatically expressed to force a greater recognition of the danger. If the recognition be much longer delayed then force of circumstances will take charge with results that will be far from pleasant.