BANKS AND MONEY.

Waikato Times, Volume 118, Issue 19662, 23 August 1935, Page 9

BANKS AND MONEY.

(To the Editor.) Sir, —Mr Johnstone’s difficulty, as Is fully apparent in his latest letter under the above heading, is that he is so obsessed with the inviolabilty of the present financial system that hr either cannot or will not perceive any viewpoint apart from that system. If all people were so moulded there never would be any progress. Mr Johnstone mixes up the functions of reservo banks and trading banks with delightful ingenuousness, and then proceeds by inference to make a chargo against the Douglas credit' theory based on a fallacy of his own malting. After asking how. new creations of credit are to be re covered (obviously a function of a reserve bank), he proceeds to describe transactions with trading banks which have no bearing on the subject. The function of industry is to deliver goods (and/or services) to satisfy the needs of all the people (not just a section of the people). This,under the present system it cannot do, not because industry is inefficient (it could deliver the goods to-morrow), but simply and wholly because of trammels imposed by the financial system. To ensure that industry is placed in a position of being able to supply these goods and services to all people (that means at the highest possible standard of living to all able-bodied persons, with liberal pensions to the infirm in mind and body, and the aged) it is necessary that credit be created and be always available and circulate on a basis of possible consumption. So far Mr Johnstone will probably agree with me, but It is here we part. The orthodox mind views the financial system from within, regards it as remarkably sound, and argues that the goods,and services are to be had by those who hunt according to the worth of the hunter- Show your “credit worthiness,” he says, and you will get all'the "money” you require. Viewed from within, this may bo so; but what of the true perspective? Looking at life as a whole, the "unorthodox” mind sees millions of : honest men desirous of the good; tilings of life and prepared to work for thorn, yet compelled to go without; poverty, misery and squalor on every hand; brilliant men failing in business through no fault of their own, and suicidos and crime on the inincrease. Side by side with this is an industry which is practically idle, and a financial system which in its fundamentals is unrelated to that industry and which at every great crisis has to come cap-in-hand to the State for protection. Is it any wonder that thousands of analytical minds, especially since the Great War, have advocated what they hold are fundamental remedies for the above absurd situation? The main remedy is to ensure that sufficient money circulates (it is not sufficient for it to consist of sets of figures in bank ledgers) io enable industry to fulfil its true purpose. To Ibis end the State must see to it that the Reserve Bank creates this credit costlessly (now for the bricks!), ns there is no sense in paying for something which belongs to ourselves. If on balance there arc £10,000,000, £7,000,000 or £5,000,000 which have not been recovered by the Reserve Bank from industry, then Iho Government, which owes this money to I lie Reserve Bank, pays it out of taxation. That-is all there is to it. As everybody would be employed, taxation would bo less onerous, and as future creations of credit would be costless the interest burden would grow less and less, it is this interest burden which, despite Mr Johnstone and i orthodox economists, will wreck j civilisation unless conveniently disregarded, as is being done between nations to-day. This proposed change is simple., honest, straightforward and underI standablc by (lie average man in the street, which is more than can be said of the present system- No one is robbed and there are no gifts, except to the incapacitated and aged, despite Mr .Johnstone and his somewhat ludicrous • comment on the Guernsey Hall. There is nothing new in Douglas social credit. Every phase of if has successfully been pint into practice at some time in British history. II is largely because of tlie inherent conservatism of mankind, the lark of perspicacity on the part of Iho untrammelled (lo put it euphemistically),'and the fact that political leaders (apart from revolution; can

only proceed at a pace consistent with tho intelligence of the people they serve (?), that the new economy has not been grasped and acted upon. I might add that, in the writer’s opinion, never in the history of New Zealand has the apparent level of political ! Intelligence and '.morality been at such a low ebb as it is today- Ilore’s hoping that the next election will give the lie lo this statement. —I am, etc., DIGGER. Malamata, August 20, 1935.