THE WORLD CRISIS

Wanganui Chronicle, Volume 74, Issue 112, 14 May 1931, Page 5

THE WORLD CRISIS

Sir, —The interesting address given by Mr Hugh C. Jenkins to the Rotary Club as recently appeared in your issue culls for a few observations and comments. Mr Jenkins stated correctly that the supply of gold increased from .1895 and then erroneously states that the with drawal of gold from the credit structure brought down prices. Why. sir, in 1914 prices immediately rose and remained at a high level practically the world over. It was only when the gold standard was reintroduced into England—the gold as a supposed basis for the structure of credit—that prices fell and unemployment became rife.

Further, the statement, “When cash or credit becomes scarce in its relationship to goods, the price of goods go down.” This makes extraordinary reading, as financial history teaches otherwise. When Britain in August, 1914, was threatened with a terrible financial storm, the banks which had undertaken to pay certain obligations in gold, as per their charter based on the Obsolete Act of 1844, found themselves insolvent. The banks could not pay. What happened? Their banking charter wfith their Jonah (gold) was thrown overboard, and peace immediately prevailed. Sovereigns and ten shillings pieces were gradually called in. The nation only accustomed to gold and silver coin—nay, even taught by so-called economic experts to regard paper money as dangerous and unreliable—immediately adapted itself to the new conditions. Although the cash and credit structure built upon gold vanished, Britain with the flower of its youth fighting its battles on the fields of Flanders and elsewhere, was able to produce forty per cent more wealth, prices did not fall, and credit was not restricted. During this nationed crisis, Britain fell back on her national credit as evidenced by her treasury notes. These paper bullets proved more effective than gold or silver bullets in winning the war. Mr Jenkins assumes that the problem of the world to-day is to bring the sterile gold into action again. What an illusion! Gold is in active circulation in America, and yet prices are falling there fast and unemployment is more accentuated than either in England or New Zealand. In 1928-29 England’s wealthy poured their wealth into Wall Street, New York, buying millions of pounds worth of industrial shares. Obviously the gold w r as not sterile sufficiently to prevent its flowing to America. Why blame America for the alleged stenlsation of gold? Mr Jenkins, with his wide erudition on economies, evidently is not keeping abreast with latest banking economics. When such world-wide economists with repute as M. Keynes, Gustav Cassell, Josiah Stamp, Darling, McKenna, and that greatest of all banking authorities, the late Sir Edward Holden, all staunch supporters at one time of England’s gold standard and free gold market, now question severely the obsolete banking charter Act of 1844. This obsolete Act has forged a chain that has hampered and is hampering Britain’s trade and industry. I have stated publicly and through the press during the last 35 years that 1 firmly believed that the gold standard of England with its free trade in gold, was ruining the greatest and finest Empire the world has ever witnessed. Mr Jenkins is not to be frightened by the coming economic impact of Russia. I would refer Mr Jenkins to Phillip C. Nash’s book, “The Challenge of Russia.” Mr Nash is “Director, League of Nations Association.” I would suggest, further, that Mr Jenkins acquaints himself with the Soviets’ system of banking economies, and he will then understand why cities are springing up like mushrooms all over Russia. Why she is able to produce 50 to 60 per cent, cheaper than the rest of the world. Why the hours of labour are being shortened. Why the school ago has been raised to 16. Why social amenities are increasing. Why taxation is decreasing. Why real wages are increasing, and last of all, why the financial magnates of the world are alarmed at the progress and success of the Five-Year Plan.

P. E. TINGEY. Mr Jenkins replies as follows: The major difference betwaen Mr Tingey and myself is this: Mr Tingey has proclaimed that England’s economic troubles are due to her “obsolete Bank Charter Act of 1844.” I, on the other hand, have asserted that Britain’s difficulties arise through the falling-off of that country’s export trade. I have invited Mr Tingey to show how any amendment to tho Charter of the Bank of England can alter conditions in the major export markets, China, India and South America. How will the amendment to the Bank of England Charter stop civil war in China, the boycott of British goods in India, the disturbing effects of revolution in South America? I take it that there is no difference of opinion about the desirability of bringing China’s 450,000,000, India’s 320,000,000 and the million of South American inhabitants into the market. I invite Mr Tingey to show how an amendment to the “ obsolete Bank Charter Act of 1844” will bring about the desired result?