ADJUSTMENT OF DEBT

Waikato Times, Volume 117, Issue 19564, 1 May 1935, Page 9

ADJUSTMENT OF DEBT

State Book-Keeping.

TAXATION STILL.

FREE FOREIGN EXCHANGE.

(By R. H. Langdon)

No. 111.

Major Douglas 'contends that the allocation of pro-ducer-credit would (be best left in the hands of the banks. Certainly Government administration of this servce would open vast fields for questionable practice —at least so long as some men think of money as wealth. Interest would decline with the increased money in circulation, and Anally become a small nominal charge. But there would still be bankruptcies, I think. Would-be borrowers and bankers themselves are bound to be at fault sometmes in their estimates of the 'public taste. Are these institutions to continue collecting the real assets of the unfortunates as compensation for a "loss” which th«y suffered only in the world of make-believe? Furthermore, dare a social credit government permit a resentful enemy to retain this most important function while it is in the protracted throes of an economic survey of the Dominion,? Britain did not give the Boers self-govern-ment on the day of the armistice. Sabotage might easily be concealed In figures. Altogether it would be a fine dilemma for the Government. ■ We must remember, too, that all Issuers of money In return for goods, services, or securities get something for nothing. Have not the banks done that for long enough? With the 'tearing of the veil from the existing sham, why should they continue to keep scrupulous accounts of "advances," “deposits,” and “bad debts?” The power motive would be gone; no longer would there be the grotesque necessity of preventing credit from pressing on the fixed bounds of currency. Why should not the defeated stalwarts vote themselves a monetary consideration in view of the shattering of their life-long illusions? It would actually be wicked of us ■to 'subject them to suoh temptation. Nor, I think, could a healthy tradition of national services toe reared on a foundation like that.

Crown Sole Issuer.

Buying out the present owners of the banks and retaining the services of the managerial staffs would not do. For one thing, it would toe cruel to compel them to confess their actual assets in a price;' and for another, pressure would inevitably toe brought to bear on the managers from political circles. Really it seems we must retrace our steps to. the cross-roads where we went astray—ln British history, the granting of a charter to a private concern cd 1 led the Bank of .England. '.. Make (he Crown again the sole issuer ol' money. This should be done 'through the financing of public works, for public services rendered, and as n gift to consumers to bridge the gap between purchasing power and prices. Apert from the shortage caused by savings, profits, etc., the flaw in the costing system will remain. This is not due to the premature cancellation Of overdrafts, as one might imagino from some recent expositions of social creditors; it is due to series production. Goods would not be demonetised any longer, but a unit of money • would circulate with a much larger number of claims against it. Tho position between the consumer and Industry would bear a close resemblanoe to the investment of savings by the individual, except that the consumer’s reinvestment in industry is automatic and inescapable. (Major 'Douglas develops this view in his “Monopoly of 'Credit.")

The question arises as to the keeping of accounts. We cannot forego our cheque system at this lime of day. Could this he left In the hands of a private company forbidden to lend? Even here wo find there would he scope .for corrupt practices. They could illegitimately dispose of the cash In their possession and call on the. State for a further supply, explaining that there had been an ’ unprecedented demand for cash. As It was a principle that legal tender be sufficient for the requirements of the oommunlty, the State would be obliged •to accede'. It would be difficult to convict the offending party. And corruption calls for abolition as surely poverty

Apparently, then, the book-keeping would dovolvo upon the State. It could be conveniently conducted In

’onjunction with the important statlsical department. / All production would be financed in the classical manner. Saving would become again a virtue meeting with its just reward. After all, there is nothing wrong with investment when something is honestly foregone by the investor. Cancellation. At the time of discarding the pro-ducer-credit system, the quantity of money in circulation could not be allowed to diminish. The Government might take over from the trading banks the whole of their "call" and short-term securities, crediting on account with the Treasury or the National Accounting -Office. The borrowers could redeem their pledges when the new order got under waf. The banks’ possession of State money would enable them to meet their obligations to their depositors when the time came for transferring all accounts to the National Accounting Office. The initial non-cancellation of consumption issues would rapidly increase the quantity of money in - the community. Some method of cancelling the weekly State Issues would be required. When the new money had bought one lot of goods it would have done its job. The nature of the economic system would not permit it to become income again without also appearing in costs. A considered percentage should be left in circulation to finance the development of Industry. Whatever method of taxation was adopted, tho financial position of the “subjects” would be revealed beyond possibility of dispute in the books of'the National Accounting office. The burden might be.shared by the fixed (safeguarded) deposits of companies and the higher incomes of individuals. National affairs would be "managed”; but <a great deal, of carelessness would have to occur before the economy of the country could be seriously affected, owing to the provision for the adjustment of debt and the consumers’ dividend, which no popular government would attempt to abolish. Foreign Exchange. The continuous devaluation of the New Zealand pound' would present no problem at tile outset in a free exchange with foreign moneys. Complications might ensue when other countries modelled their money system on ours. There might then be considerable fluctuations, but with a free exchange these would closely afford a true ’ comparison of the moneys at different times. Incidentally, no charge of “dumping” could bo made because internal financial debt would accompany the rise in the exchange rate consequent on the devaluation of the money unit. When other countries copied our money method, we should in decency recognise the Just debt for fixed overseas obligations. And expect the same in return.

Private companies would carry on the business of foreign exchange—■ preferably the existing trading- banks with their London connections. They would require to possess money of the realm, through investment or by the sale of assets, and have an account with the National Accounting Office. Payments to exporters should be recouped, as now, by sale of sterling to importers. Brokerage would provide the return for their services. Plans for dealing with money are elaborate because of a shuddering horror of inflation. Everything could be coolly “managed." Even Mr J. T. Lang might be let loose with a permanent system of detot adjustment. Surely the “socialists” are not wholly ashamed of their early simple love? At least they had the germ of the idea.