REVERSED ORDER

Evening Post, Volume CX, Issue 139, 10 December 1930, Page 18

REVERSED ORDER

SUPPLY AND DEMAND

<(Tlic Dual System of Stabilisation" is the title of a book published iv London by J. Taylor Peddic. It points a picture of loir cost production that will {by low prices) compel consumption. This is how it appears to the "Argus" reviewer:— My.. Taylor Peddio claims for his dual system of stabilisation that it enables producers to assume control of the price level, with the striking result that falling prices and rising wages will follow. This happy result is to be brought about by a banking policy under which credit will be issued against potential production, enabling producers to sell their goods at low prices. According J) Mr. Peddio, "supply will precede demand, and thus we make effective the predetermination of prices by producers." Mr. Peddio does not consider that the demand may not be equal to the j task of lifting all the commodities off the market, nor has he shown how costs of production can be reduced while wages rise. He does not work out any of the details of the banking policy he proposes; he confines himself to the mere declaration that credit will automatically grow with production under a modern central banking system in which the central bank, as in the United States, rediscounts commercial bills. Mr. Peddie makes comparisons between the British and American banking systems, and finds that the British note issue and the tendency of the British banks to issue credit against securities give the British system less elasticity. No student of banking will follow him in this comparison. The British banking system is remarkable for the vast volume of credit it sustains on a relatively small gold reserve. If all countries could attain tho efficiency of the British system thcro would be no scarcity of gold to-day. Mr. Peddio wants the volume of credit to be increased, and he asserts that prices will fall. No proof of this proposition is advanced. Of course, prices would ftill if production and trade wore increased by. more than the credit created, but few peoplo will share Mr. Poddic.'a faith in the capacity of industry to produce more goods 'at lower costs simply because credit is expanded. Experience is also against him. It is remarkable how short is the memory of advocates of increased credit as a means of. promoting industrial revival. Inflation may give a false stimulus "to industry, but this cure is always worse in the end than the original disease.