NEED FOR HOUSES

Wanganui Chronicle, Volume 79, Issue 242, 13 October 1936, Page 9

NEED FOR HOUSES

INTEREST-FREE MONEY WANGANUI COULD DO WITH £lOO,OOO MR TINGEY STATES HIS CASE Advocation of the use of interestfree money was made by Mr Tingey, and he expressed a firm belief that the Government was conscious of the position and was out to follow the principles he had so long stressed. The speaker, pointing to Wanganui’s need for houses, declared that they could be built with money created by the Reserve Bank and, when built, the loan written off in the bank’s ledgers. He set Wanganui's share of the live millions’ created money at £lOO,OOO. “Wanganui needs hundreds of houses. Half of the city wants rebuilding,” Mr Tingey stated. “For the last few years Wanganui has been static, its population decreasing. Something drastic has to be done. At the annual meeting of the London Chamber of Commerce, held last June 9, Sir Stephen Demetriade, K.8.E., president, stated that political disturbances have their roots in economic distress. This self-evident truth has been demonstrated in New Zealand during the last few years, culminating in a change of Government last November. The Prime Minister stated: ‘The money system should be based on goods and services. This would enable payment from the Public Credit to be made to farmers and others in equitable relationship to services rendered and without increasing taxation. The Public Credit should be the means used to establish a money system which should equate buying power with production.’ This philosophy, I think you will agree, is sound; the Public Credit converted in terms of money as legal tender by law. Primary Function of Money. “The primary function of money is not for the purpose of enabling people to save so as to lend at interest, but to effect the distribution of goods and services from the producer to the consumer and user. Professor J. M. Keynes, in his latest book ‘The General Theory of Employment, Interest and Money,’ writes: ‘Consumption—to repeat the obvious—is the sole end and object of all economic activity, opportunities for employment are necessarily limited by the extent oi aggregate demand. Aggregate demand can be derived only from present consumption or from present provision for future consumption.’ “Wanganui, from a comparative point of view to the other cities, has lacked this economic activity. Building has been almost at a standstill for years. Nevertheless, there is a strong optimism amongst monetary reformers—especially since the change of Government, who have faith in the future of Wanganui, once known throughout New Zealand as ‘pretty, prosperous and progressive.’ To-day the optimists and the monetary reformers feel convinced that the Government will implement their election promises, by reducing taxation, in the use of Public Credit—that is, monetising the potential wealth, real wealth, of the future. “We believe that the Prime Minister, when he was leader of the Opposition, knew and understood his statements that ‘borrowing means debt in perpetuity. All political history shows that poverty and economic stress can be traced to borrowing. What the people want to-day are higher incomes and lower taxation, and it wants these things without raising prices—raising hell—i.e., it wants them constitutionally.’ “In the second Finance Bill authority for the borrowing of £5.000,000 for housing, the Minister of Finance stated that they, the Government, were going to get this money from the New Zealand Reserve Bank. May I suggest that, r.lthough the position seems contradictory to the Hon. the Prime Minister’s previous statements regarding ‘borrowing that means debt in perpetuity,’ the borrowing from the Reserve Bank will mean nothing more nor less than figures in a ledger, representing the executive ability of New Zealanders to create real wealth as represented by the houses erected. The peculiarity of this proposed borrowing system is deceiving the very elect. The new system altogther, different to orthodox borrowing, as practised under present so-called ‘sound finance,’ really means introducing a monetary system essential to the working of a proposed plan of production. In this particular instance it is £5,000,000 worth of houses. First and foremost, the Government must furnish a unit of account, without which it would be impossible to produce a coherent plan. This unit, the New Zealand pound, will serve as a common denominator in terms of which resources of all kinds—skilled tradesmen, unskilled labour, materials, tools, etc., can be measured. It will then be possible for the Government to provide credit for the planning authorities to allocate resources in the form of grants from these New Zealand pounds, obviously the New Zealand pound will act as a unit of account to serve as a basis for costing.

Wanganui’s Housing Claim £IOO,OOO “Wanganui, on a population basis, ■ will be able (and justly) to claim just on £IOO,OOO. This amount will finance one hundred houses of a value of £IOOO each. The finance will be needed to buy the land, for Wanganui, fortunately, possesses hundreds . of sites—elevated, dry sections that can be made beautiful for situation, the joy of Wanganui’s present and future generations. The sections can be put for auction on the Glasgow Lease principle, with an upset price for ground rent; that can be made . attractive and the money loaned at costs of administration only. This will be true economic democracy. On the Guernsey principle, all rents will be paid to liquidate the issue of the credit advanced. Let it be understood that (assuming £IOOO has been loaned) only is it possible to pay back £IOOO. It is impossible to pay back more money than it issued. "By eliminating interest (for costs of production are consumption) the whole of the advance, with administration and upkeep charges, should cost the occupier approximately 25s weekly. This would, therefore, wipe off all liabilities in twenty years. I know that great objection is taken to doing away with interest, but I would ask the question, ‘Why should Public Credit (if it is possible for the Reserve Bank to create credit) be subject to interest’? To put it another way, ‘Does it not seem aburd that the people should pay interest (taxation) on its own credit?’ “A well-known economist wrote: ‘The lack of a sound theory of money is the reason why the phenomenon of interest has never been satisfactorily explained. For 4000 years we have paid and received countless of thousands of millions in interest, yet science is at the present day incapable of answering the question: Whence and why does the capitalist receive interest’?” “Remarkable to relate, Professor J. M. Keynes, in his ‘The General Theory of Employment, Interest and Money,’ evidences his confusion to a change of opinion on this vital question of interest. He writes: ‘I was brought up to believe that the attitude of the Mediaeval Church to the rate of interest was inherently absurd, and that the subtle discussions aimed at distinguishing the return on money, loans from the return to active investment, were merely Jesuitical attempts to find a practical escape from a foolish theory. But I now read these discussions as an honest, intellectual effort to keep separate what the classical theory has inextricably confused together, namely, the rate of interest and the marginal efficiency of capital. For it now seems clear that the disquisitions of the schoolroom were directed towards the elucidation of a formula which should allow the schedule of the marginal efficiency of capital to be high, whilst using rule and custom, and the moral law to keep down the rate of interest.’ Russia’s Example. “Speaking ot Rotary seven years ago, I stated that I felt convinced that Russia had solved the money problem. That in‘ the building up of her national economy she would become the greatest economic impact for the rest of the capitalist nations to contend with. My studies on economic monetary science relative to Russia confirmed a remarkable and philosophical statement, written by the late Sir Basil Blackett: ‘The economic background, combined with ethical and political questions, are of importance in shaping the background of any possible science of economics, and still more the economic history of any particular period.’ Unless something exceptionally radical is done in the present monetary system, civilisation, as reflected in the capitalistic world, will have to give way to Communism. “When it is remembered that Russia is now building up the national economy of Turkey, and several other Asiatic countries, by loans free of interest, the loans for the specific purpose of the erection of plants, woollen, cotton, rayon, motor, the building of roads, railways, aerodromes, etc., etc., further Russia’s own economy, Stalin announced that the authorities hau decided as from the beginning of the year to remit half the loans given to the agricultural concerns, reduce interest rates by half and taxation, if it is possible, Mr Chairman, for Russia (a country the most backward of all Europe a few years ago) to solve the money problem, why cannot the Anglo-Saxon and other civilised nations do so? New Zealand to-day, I feel convinced, is going to lead the way with monetary reform, rightly applied, that will keep Communism out of New Zealand, and put her in the vanguard of the new civilisation and the new economics. “Xn New Zealand the State builds the roads and railways for the transport of merchandise and goods, and it will also now provide the currency for the exchange of such wares. The Government precludes anyone from interrupting the traffic of a busy street by obstacles—for instance, mobs of sheep or cattle. These would not be allowed to impede the traffic; therefore, limitations interest—to Public Credit finance will be and must be removed as the supremacy of Public Credit is administered scientifically in the true welfare of the people that supplied the real credit, real wealth, real assets. “Legislation will, I feel convinced (as monetary science advances), insist that no one shall interfere, interrupt or delay exchange by holding back money, in demanding interest. Private lending of money I am not dealing with; only the money created for and on behalf of the people—viz., Public Credit by New Zealand’s own State Bank, the New Zealand Reserve Bank.” Mr Tingey continued in condemnatory strain regarding the imposition of interest charged for money used ■ for public good. ! ‘lf the Govrenment allocates Wanganui’s share of £IOO,OOO out of the £5,000,000 New Zealand pounds to be created by the Reserve Bank, and one hundred 1 houses are built—houses that any business man will not be ashamed to live in; built out of the Public Credit of Wanganui’s executive ability—£loo,ooo New Zealand pounds will become not only Wanganui’s liability, but r.lso Wanganui’s assets. Therefore, every endeavour should be made to im- 1 press upon Parliament, Wanganui’s needs. “Assuming that our efforts are •successful and £IOO,OOO is allocated as Wanganui’s share, there will be no need to print any further New Zealand pounds, as there are sufficient

in circulation—roughly £7,000,000 odd, and £4,000,000 odd held by the trading banks. If our assumption is wrong, the Reserve Bank can issue the additional money, for the Public Credit is the true foundation of the money system. We have sections within the city, and there is no need to trouble about finance, but as these sections are borough owned, they are not bringing in any revenue whatsoever. We have also sufficient services, material, timber yards, joinery factories, stocks of all kinds to build these hundred houses. Under the old rotten system, we would have had to go to the London money (credit) market, and ask their permission to build these houses. It is almost unbelievable. The present position would now resolve itself, obviously, into the following position: The Reserve Bank would issue to the Government a loan of £5,000,000. This loan would be debited to the National Credit of New Zealand, Wanganui’s share being £lOO,OOO. “Ruskin postulated the economic axiom that production should equal consumption. In other words, workmen need clothes and food, their wages having gone into consumption as production increased. This process continues from week to week. If our estimates have been correct the New Zealand pound as a unit serving as a common denominator utilised £5,000,000 worth of Public Credit. “This visualisation of the future, with £5,000,000 worth of desirable ana I well-built houses, finished and oocu-1 pied, everybody who rendered goods and services has been paid. All that remains is the £5,000,000 loan, figures’ in the ledger. Will anybody question I the suggestion that this debit of £5,000,000 should be credited with the assets created, the real wealth from the Public Credit, to square off the loan ? “In (Conclusion, may I remind our honoured guests that they belong to a party that, for years, has preached, inside and outside the House, the principles of what is known as the Guernsey plan of finance. May I strongly suggest that immediate action be taken, and in doing so, quote the Hon. Walter Nash, Minister of Finance, who, when speaking in the House to the financial debate on August 11 last, said: ‘But never before in this country (New Zealand) has an attempt been made to expand production up to the limit set by the needs of the community.’ “Dealing with the building industry, in particular, Mr Nash said he thought the Government could go into its housing programme without having to resort to taxation to foot the bill, and that ‘every effort be made to implement this policy by the issuing of the Public Credit.’ ” (Mr Richards’ reply on Page 8)