DOUGLAS SOCIAL CREDIT

Waihi Daily Telegraph, Volume XXXVII, Issue 9206, 7 April 1938, Page 3

DOUGLAS SOCIAL CREDIT

Sir,— Owing to “L.F.’s” advancing clarity, I now have some definite questions to answer. In my last letter I gave the February returns of the New Zealand trading banks, showing that deposits far out-ran their advances —but “L.F.” is convinced that this is dud money and quotes Sir Reginald McKenna in support. He admits candidly that the dud money is lent to the banks clients (if they offer sufficient security).” This is precisely what I said the banks do. They tokenisc or moneytise, the capital frozen in the goods and securities, thus enabling further production to take place and this is necessary to an expanding standard of comfort. “L.F.” then objects to the banks getting back more than they lay out. Well, sometimes they don’t. This is known as the problem of interest, and interest is theoretically paid out of the surplus of production over consumption (I am using general terms). It is, as Mr McKenna points out., enormous in the aggregate. llow, then, does this (dud) money multiply so rapidly? Simply because banks are clearinghouses for credit and business accounts. While money is continually coming in, about per cent, of actual cash only is required to meet probable commitments, thus an original sum (i.e. fixed deposits) may be indefinitely expanded according to the velocity of return and the rate of interest. This wa* how the late Sir Joseph Ward proposed to operate the advances to settlers fund —The Bank of New Zealand had to get State aid through over money!ising sororities locked up in land during the late Mr Seddon’s time. Coming, then, to the final questions asked, I have shown where interest comes from —like land royalty, it is a charge upon production for the use of capital. It would be dud capital only if it became invalid. Banks pay about £7 per ounce for gold of standard purity and the Reserve Bank took over the trading banks’

gold and exchange securities by giving them legal tender in exchange. This was not dud money to them, as every note issued was by law constituted a commodity to the extent of its face value. The banks had previously been allowed to issue their own notes. Now when a bank client issues a ehetiue, he money tises

his own security with the bank s guarantee to find it —but this is not Douglas Credit. —I am, etc., K.N.D. gii^—Answering your correspondent, “More Light,” I think that if ho will read the letters of “L.F." and myself lie should be able to form some ideas on the subject. Briefly, t take it that Major Douglas saw the immense deductions being regularly made from industrial activities for money Using frozen goods and ,securities and proposed to meet the case in two different ways: (1) by the State issue of credits —debt free —to licensed linns. This would throw the risks of market upon the State, as in the New Zealand housing schemes; or (3) by issuing discount dockets to counteract any rise in price levels arising front the inclusion of interest in prices. There was considerable difference in opinion as to whether these dockets should apply generally or to specific lines. —I am, etc., E.N.D.