EVILS OF DEFLATION

Waipukurau Press, Volume XXVIII, Issue 122, 18 May 1932, Page 7

EVILS OF DEFLATION

CAUSES OF WORLD SUFFERING

A BANKER’S VIEWS Dealing with the economic outlook, the governor of the National Bank of Egypt, Sir Edward Cook, in his speech at the annual meeting in Cairo on March 17, remarked that "perhaps the easiest of all words to misuse are ‘inflation’ and its antonym “deflation.’ “Now it is true that in the vast majority of cases inflation is thoroughly bad. It sets up a vicious circle of rising prices and deficit budgets, from which it is difficult to escape except by heroic measures. In consequence, the word has a nasty sound. By contrast, “deflation’ has come to have a pleasant ring. But excess does not make for health, and it is from a surfeit of deflation that the world has been suffering for the

past few years. “I could give you many examples. Let me give you one taken from a country in a different hemisphere. A farmer in the U.S.A, who in 1921 contracted a debt which, measured in the commodity he produces, amounted then to 1000 bushels of wheat, found by the middle of 1931, that, in order to pay that debt, he had to deliver the equivalent of over 3000 bushels. The burden of having to produce that extra amount of real value-has been in many cases more than the debtor can bear. What is true of individuals is true also of debtoi' countries. Important as it to preserve the sanctity of contracts, it must not be forgotten that an inability to collect their debts sooner or later impoverishes the creditor classes also. The deflation of the last few years, far from being a blessing, is perhaps the biggest curse that has fallen on mankind in recorded history. In Great Britain and certain other countries, by force of circumstances rather than by design, the process has been arrested and industry liberated from the intolerable strain of further deflation, by the unlinking of their currencies from gold. In the U.S.A, an effort is now being made deliberately to produce the same result by other means. W T e may call this “inflation" if we like, but if we do so we may have to alter our ideas as to what the word connotes.’’