CURRENCY AND TRADE

Evening Post, Volume CXII, Issue 80, 1 October 1931, Page 19

CURRENCY AND TRADE

(To the Editor.) Sir,—The title of your Monday's leading article, "Autumn Madness,' could more appropriately have been placed over your secondary article entitled "Depreciation Scramble," for it is quite impossible for anyone/ however gifted,- to extract any sense either from the article rtselt or from the cabled summaries from London during the past week dealing. with the financial'juggling b£ the pound^ sterling. Where' all is thick mist and dire confusion, the plain man/must for guidance to first principles. This tells turn; first, that currency has libthingto do with foreign and oversea trade. The basis ;p£ that, according to the best authorities,, is, and has always been, simple barter. Gold,, if used at all, is used only as a handy commodity to square off small trade balances. However interwoven it may be^aJU trade is finally equated at the Boyal Bxchaijge, London. This being so; it is nonsense; to assume that a deyalueii .and inflated cur : rency can have a favourable effect upon export trade. Raising, as.it does, the. nom- t inal value of all goods, it.'should, if anything, have a deterrent effect on; trade. Foreigners, and also our own.people; buy goods because., they .are cheap, and not because they "are dear. One effect of L inflation, therefore,' is that vast numbers of people are deprived of their;'ability, to purchase. Many people will hold^jhowey^ that. a plentiful .supply of ,monfey^*hjc| by liypotheiW the J>aok«,,are:rcady ply, Will provide :tt.di^cto*tiimilant :.ys? : tiide and productt6nj aiidvrtiat/thia.jS'a BufficientcompenMtion for all .other draw; backs. In this, Jo*coursi*: they V™™** taken; in any, case, a batik rate^ of « per cent! has been devised to. check, fc^ wade boom. The , net .effect of .the /inflation, thete i* to :diisc6uiage;:both extona}-and: 'ifitwiiai^.tri!(ae;%:^^ffl^^<^:^ t*; :rribra:^strikes.; .fpi^TOCVe4sed^*f«e^^tp A^ ;pf^s:thoso%eb P le>itfcfn^»floproe?^ rob all; holders of;existing; bank accounts, mortgages, asßurances,: bonds, etcSeto mr flate the value p|; all:;land and. all; exist-^ ing wealth, including commodities in stock for'sale,..thus enriching one set of people at the expense of another. Iraally, to permit the Government to extinguish a national liability, .of. indefinite amount, by■■placing a burden on one or two sections, which should be borne by the whole people. ... _ ■ Under no circumstances can juggling, with the currency induce prosperity. If the country is weighed down by internal rtebt, the courageous and manly course is always taxation. Whatever predicament the :Hpm& Government was in, it must be borne in mind that Britain is a creditor ■nation to halfthe world. Probably^ portion of her enormous • investment* has reference to the gold standard, and so is immune from loss, another, portion belongs to trading companies whose profits need show no diminution and whose stock will bear.a higher interest; but a very large part will undoubtedly be based on sterling, and the annual loss on this will be considerable, the New Zealand Govern-

ment's gum at Britain's expeusc alone amounting to £2,000,000 per annum. Many people in New Zealand are elated at the rise in primary products; but as the rise will encourage other countries, besides Britain herself, to increase production, and as the money can only arrive here in the shape of goods bought at inflated prices, there does, not seem much to be cheerful about. In addition to these considerations, the Home consumer of our products will certainly be in a worse position to buy them, so that we can expect a lesser demand. In the matter of Britain's external debts, these can ■ only be paid by the export of commodities, of which gold is one. There' not being nearly enough gold to accomplish this, the United States of America must either accept other commodities or remit the debt. The gold, in any case, is useless in over large quantities to the United States Government. So rich are her internal resources and so much wealth is owing to her, that were it possible to effect a just distribution of it, their working day could be reduced considerably, while yet raising- the standard of ; living. So poor, however, is the general, knowledge and so uncompromising the' temper of the various sections o£ people, that they prefer poverty aud unnecessary work to an enlightened leisure. An.'enofmous amount of harm is being wrought among civilised peoples through uneconomic! ideas. Men have yet to learn that they do not live to work, bu,t work to live. Psuedo-economic theories, as that machinery is harmful, that it is necessary to impose high tariffs to keep out foreign wealth, that a country grows richer by the excess of exports over its. imports, that the mere printing and distribution of.bank notes will bring the millennium,'hold'the .popular mind in thrall. Henry..George's, principle of the taxation of rent 20s in the £> coupled with the complete freedom of trade, is still the only rational solution of worldwide econbmic troubles.—l am, etc., :;;;,. r. a. gosse.. 1 [Passing over our correspondent's claim to speak for "anyone however gifted," we would point out that he has at least extracted some small measure of--sense from the article. In stating that America must either accept commodities or remit debts he has accepted one of the principal points of-the article to submit it. as his own. ;\Vhea he states, however, that "currency has nothing to-do with foreign: and overBeasi trade" and that f-jfc is;, nonsense to assume a devalued and inflated currency can have'ia favourable effect' upon export tvade" he" does not show equal, discernment. When a 'greater volume of goods must be exported to pay for imports there isi.a stimulus to export, and when the currency will buy more foreign goods there is encouragement of imports. These are admittedly immediate effects -which tend to become lees marked, in, time. Higher internal costs for manufactured goods in time offset the cheapening effect of • depreciated currency; and an adverse ex* change has in itself a powerful influence on the direction of trade.—Ed.] ■ ■'■