PUBLIC OPINION

Wanganui Chronicle, Volume 77, Issue 257, 30 October 1934, Page 4

PUBLIC OPINION

NOTICE TO CORRESPONDENTS. Letters addressed to the editor which only approve one party to any controversy which is in progress, cannot for considerations of space, be published in the “Chronicle.” Readers are entitled to their individual judgment on the debates, but the columns of Public Opinion cannot be used for registering those judgments. —Editor. THE FINANCIAL SYSTEM Sir,—lt appears that your correspondent, Mr. O. B. Bartrum, has taken umbrage at being called a “heckler” I am sorry if I have hurt his feelings > but, surely, it is a fairly mild term, and at the recent Douglas Credit meetings at Makirikiri he has been unique in his sustained attitude of hostility and his constant, but ineffectual, efforts to belittle (not merely to criticise adversely) the D.S.C. proposals and the D.S.C. plan for New Zealand. He says, that this remark (made on the 23rd. inst.), “stirred his latent interest into activity against this one-eyed and intolerant movement,” then how does he explain his letter dated 17th. inst., in which he attempts to burlesque the Douglas Credit plan for New Zealand? That should bo difficult to answer. Here is another instance of the unreliability of his statements. He quotes me (or Mr. Whitehead) as saying ‘ ‘ that tho Governor of the Bank of England, did not understand the bal-ance-sheet of his bank. ’ ’ In this connection I actually read from a publication as follows:—“Mr. Walter Leaf, who was chairman of the Westminster Bank, in his attractive little book on ‘Banking’ in the Home University library, says of the Bank of England: ‘What the real profits of the bank are is a secret which is never revealed.’ He tells how during the war he was discussing the bank return with the then Governor of the Bank of England and said ‘that there was only one line of it which I thought I understood and that was the line, gold coin and. bullion. ’ The Governor, witji a twinkle in his eye, replied. ‘Mr. Lear, I do not think you understand even that.’ ” I also read: “Mr. Hartley Withers, who is almost lyrical in his admiration for the financial system, writes in his ‘Bankers and Credit’: ‘Banking statements and balance-sheets were always designed rather to veil discreetly the modesty of our monetary institutions than to let the full light of day upon the beauties of their figures and proportions. Since the war this has been more than ever so. Much of the information that used to be made public has been withheld.’ ” You see what a peculiar twist he has given to my quotation. With regard to his complaint that nobody in the audience “could understand how the price (referring to the payment of the national credit authority of an adequate price to exporters) was to be made up from the world parity and the ‘just price’ an exportable surplus,’’ I should like to refer him to C.B.’s excellent exposition in your issue of the 26th. inst. Then he attacks my remarks concerning the much discussed N.Z. credits in London, and also my statement that money cannot be transferred from one country to another. I repeat that those credits cannot be transferred to N.Z. We know that the Government “took them over” from the trading banks, and then the Central Reserve bank took them over from the Government; it’s all the same; no matter w T hat financial manipulations we arrange here the credits in hand simply remain untouched. The only way N.Z. could use them would be through the Reserve Bank selling them to importers who would use them to pay f° r imports from British firms, or else by payment in gold bullion, which is highly improbable. But importers will not import extensively because they could not sell the goods to the public of New Zealand which is suffering so woefully from a shortage of purchasing power so surely it is obvious that we could use our London credits only through imports. The same principle applies to all so-called transfers of money from one county to ■ another, through the medium of drafts or bills of exchange or as loans. But the N.Z. credit funds in London provide exchange or as loans. But the credit funds provide a clear example of the inevitability of goods payments between countries, whereas tho explanation with regard to certain smaller transactions is more complex and so unsuitable in this brief space . He quotes me as saying “that the British will not allow the credits to be applied to the redemption of any of our public debt.” This, I think, is rather strong. I certainly advanced the recognised theory, proved in recent international practice, that it is embarrassing for a creditor country to accept payment in goods, (and this would bo a virtual payment in goods), because that

■ would tend to establish an unfavourable trade balance for that creditor country. This principle applies in Britain as well as anywhere else. He objects to my quotation of a 5 per cent, bank dividend, when discussing the question of hidden bank reserves, and says that he can remember “dividends of 16 per cent., nay 25 per cent, paid by the banks.” Surely such percentages as these indicate usury of > the most pernicious kind. Ho states that we advocated “in- • creasing primary production for the , Home market. ’ ’ Actually we advol cated level trading with Britain, in - which case Britain would %ot talk of a r quota, but would obviously buy from 1 us in’ proportion to our buying from , her. Our present one-day trading is - naturally objectionable to Britain, and 1 is the real cause of the suggested i quota. t Apparently Mr. Bartrum has considi ered the national dividend as a good - feature of the D.S.C. proposals to at- ,, tack, and he is somewhat disappointed ■- to lose this aiming mark, since it is not r included in Colonel Closcy’s plan for i New Zealand. It is not included be- - cause it would not be necessary in this 1 country, which in its state of immaturr ity would provide work for practically [. all available people under a scientific . monetary system i.e., with the correct ’’ equation of purchasing power and pro--6 duction, the aged, the infirm and the t unemployed receiving an adequate allowance to maintain them in decent, but bv no means luxurious, conditions. I would appeal to Mr. Bartrum, for a’ the sake of his children, to whom he refers, and for the sake of everyone else to throw his weight into the great 6 cause of the emancipation of mankind from the evils of an outrun financial “ system, which condemns large numbers ' e to misery and degradation and prevents us from using properly the fruits of a ■ n bounteous earth.—l am, etc., :e R. O. C. MARKS. Wanganui, 28/10/34

ECONOMICS FOR ALL Sir, —As to the relevancy or otherwise of “National Credit for All’s” remarks upon aeronautics and the science of political economy and his assumption that I want your readers to follow the text books of economists of many years ago I am prepared to leave them to form their own conclusions; but I would point this out to them that the old economists have laid the foundations of economic science and that any student of that science needs to have some knowledge of their theories to get a comprehensive view of the whole subject. I quoted Mill to show his views on the point raised as to whether the quantity of money circulating in a community has any direct bearing on the prosperity or otherwise of a country. “Experiontia Docet ” opined that plenty of money was circulating in New Zealand at the present time and was available from the banks; but that nevertheless the country . is still unprosperous “N.C.F.A.” denied the first part of that proposition and in referring to Mill says that Mill was quite right when he said that the quantity of money in existence did not make much difference. But “N.C.F.A.” seeks to minimise his concession by saying that the world was short of goods in Mill’s days and the issuing of extra money would not produce more goods but would cheapen the money instead. The fallacy involved in “N.C.F.A.’s” argument is that the world was short of goods and that it was an ago of scarcity. (During the latter 30 years of Mill’s life from 1840 to 1870 Great Britain was developing industrially at a rate greater than any other country in the world and instead of it being an age of scarcity Britain had more goods than her people could consume and her exports and imports increased greatly. Moreover, the working classes were able to bank more money than at any other earlier period. After Mill’s day during the seventies Britain’s trade still developed and by 1880 her imports and exports were enormous. There was no scarcity of wool, wheat, etc.; but the prices were low Then it was that the -• U.S.A, swamped tho British market with wheat and wool at so low a price that it brought ruin to many Australian and New Zealand farmers; slumped business generally and throw many thousands out of work in the colonics; yet Britain had plenty of money “N.C.F.A.” is labouring under a delusion when he says it was an age of scarcity and that there was not enough goods to go round; the logic of facts is against him. I agree with “N.C.F.A.” that an increased issue of money would cheapen money. Yes! It would raise the price level and people would have to pay more for commodities, pay more rent and interest, taxes, etc. hiill points the same thing out. “N.C.F.A.” tells your readers that 1 do not grasp the real function of money which he says is to facilitate Ihe distribution and consumption of goods. Why! old Aristotle knew that sonic 350 years before Christ and has said as much in his treatise on economics. Even the Chinese two thousand years earlier knew that when they invented money to act as a medium of exchange. The principles of money were understood thousands of years ago. Even the Jews’ seventh century B.C. had a gold currency, as did their neighbouring countries and banking a little later was established already in Babylon when the Jews were there in captivity. I guess “N.C.F.A.” could not have taught anything about money to Chad, the famous banker of that metropolis. “N.C.F.A.” appears to think that I do not read anything of the writings ot present day economists, that is -where he is -wrong. McLeod, the great authority on banking belongs to the now school of economics but gives the older writers credit for the truths they have made manifest in their writings. Economics is an inductive science like other branches of physical knowledge and its development necessitates similar observation and theorising on facts, McLeod well observes that “Economics is the noblest and grandest creation of the human intellect. It is the crown and glory of the Baconian philosophy. Every science is greater than any of its cultivators. Astronomy is greater than Hipparchus, than Ptolemy than Copernicus, than Kepler, greatei than even Newton himself. So econ omics is greater than Turgot, thar Quesnay. than Smith, than Ricardo than Mill. Time’s noblest offspring i: its last.” “N.C.F.A.” tells your read era that there should be at all time) iufficient money to buy all the good: produced. What, paper money am tokens? How would he instrumen such a system? How could he fix th* price of anything without relation to '< recognised standard or measure o value? Demand is the principal facto

in determining the price value of an article, Under present conditions of an open market the public are enabled to take advantage of the supply of any commodity they want and the demand regulates its exchange value as expressed in currency tokens. Do away with the gold standard and there would bo no sense in saying a thing is worth five pounds sterling If the State is to fix the price of all "products arbitrarily assessed in tickets exchangeable and not convertible into gold would it not be better to go the whole hog and have Socialism at once? “N.C.F.A.’s” reiteration that the , banks make and destroy paper money is not denied but it is not true that the amount of money in existence is en- , tirely in the hands of the banks. McLeod says that there is an enormous amount of gold coin hoarded in India i and in other parts of the world. As to i paper money, too much of it in circulaL tion depreciates the gold and silver currencies. Even during the war the • Bradbury notes reduced the incomes of [ hundreds of thousands of people causing enormous loss financially. 1 “N.C.F.A” still damns the banks for ; the financial troubles of the world and • one would think that their aim is to - wreck civilisation. He does not con--5 ceive that there are possibly other - causes for the depression, for instance r the late World War. high tariffs, war ’ debts, taxation, militarism, national t and social Extravagance, natural causes - like earthquakes, famines, droughts etc. 3 He does not have any knowledge of the - great difficulties the great banks of the world have with the various currencies of the world in the way of exchanges. r Of how the banking machinery has to e be adjusted to a changing world. If e he wants to know anything about the t problems of banking and finance let 1 him read the recently published L 1 treatise on finance by Prof. T. E. s Gregory. D.Sc. University of London, s I hope” that I am not so ignorant of a economics as he would have your readers believe, but I have read sufficiently Ito understand at least to some extent the difficulties underlying the grappling

with the vexed money question. 1 believe with the late Herbert Spencer that every economic evil finally brings about its own solution. In conclusion I would point out to “N.C.F.A.” that Maurice Dobb, lecturer in the University of Cambridge, docs not share his contemptuous reference to the old economists as holding stone-age principles for in his brilliantly written treatise “An Introduction to Economics” he surveys the historical development of economic theories since the days of Adam Smith down to the latest theorists Keynes, Hawtrey, Marshall in England and Irving Fisher in America. He concludes hs survey with the observation that the solution of the problems of the general distribution of wealth still remain to be answered presumably in terms of the conccrpts which classical political economy created. If “N.C.F.A.” had only a better knowledge of the subject upon which he dogmatises and was a little less bumptious ho would not bo so ready to hurl the epithet of “ignorant” at his opponents.—l am, etc., “VERITAS.” BANKERS AND BANKING Sir, —Now that “National Credit For All” has had enough rope with which to tangle him up properly, 1 will proceed to lie him securely with it by stating the following simple facts about banking, and calling upon him to disprove them:— (1) Banks do not control the issue of j money and they cannot inflate or deflate at will. (2) Material wealth may be divided into two classes: (a) Artificial wealth, namely gold, the value of which is conferred on it by the State’s decree that it shall be accepted as final payment for a debt; (b) real wealth, such as land or goods. (3) The banker does not produce or create either. (4) Gold is deposited with the banker for safety; when wanted it is drawn out and exchanged for some form of real wealth, (5) Real wealth is not deposited with the banker, but tho titles to that wealth are so deposited, and are transferred by means of our banking system without transferring possession of that wealth (6) Banks issue money or grant credit which results in the issue of money, but they do so only at the request of and merely as the agent for a principal. (7) The banks do not confer titles to wealth, but merely register such titles. (8) Before you can obtain a loan from the bank you must deposit with the banker the necessary security, for when he honours your cheque he guarantees to the depositor that the bank holds securities of sufficient value to protect the deposit. (9) Deposits are the result of advances and not as some think the source from which advances are made. (10) Banks do not create value: they merely measure it. (11) Banks cannot issue or restrict credit at will. Before the banker can give credit the owner of property must apply for it, and must transfer to the bank the necessary security, the bunker satisfying himself as to the money value of the security. Of course, sometimes the banker may be over cautious in measuring the money value of his securities, but it must be remembered that like anyone else he may* be called upon to pay up not at the top of the boom, but at the ; bottom of the slump. (12) The bankers’ business is to keep the accounts of his customers aid i to examine the legal title to their wealth offered to him as security, > (13) No suggested alteration to our . banking system will confer any bene- • fit whatever upon the people. I think > I have written enough now to com- •’ plctcly disprove the assertion of > “National Credit For All” that the present banking system is to blame for • existing conditions. Unless he can I prove in your columns that I am in- > correct in my statements I am the win- • ner in this controversy. He will have to admit that occasion- • ally even an ordinary John Citizen may r show he is not altogether devoid ol 1 brains. For one who, as he tells us 3 occupies such a reponsible position in . regard to the general public, “Nations 3 Credit For All” displays a lamentable 3 ignorance of ordinary business s methods. Anyone with the slightes’ ~ knowledge of banking who reads thi: a letter must conclude that it is he am f not I who has a lot to learn. Thi: e main attack has been directed agains l t the banks and I have now defeated it 1 When one has to deal with an oppon I. ent who is so positive in his wronj i. views and so intolerant of the opinion f of others, it is always best to let hin I- carry on for a while in order that h y may show how little ho really doe t know. —I am etc., g G. F. MOORE.