The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES" GISBORNE, MONDAY, OCT. 19, 1942. “SHEER INFLATION”

Gisborne Herald, Volume LXIX, Issue 20918, 19 October 1942, Page 2

The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES" GISBORNE, MONDAY, OCT. 19, 1942. “SHEER INFLATION”

The discussion in. Parliament on Saturday regarding the bonus paid by the British Government on wool prices is of more than merely academic interest; to some extent it opens up the whole, question of the Dominion’s financial methods. From the Government benches, one Minister argued that the payment should not be made to the farmers because, it was “just sheer inflation.’; . . Another defended the proposed retention of the money, or part of it,, by the Government on the ground that, the, farmers had not asked for the increase which “Came down out of the blue.” This seems to be a remarkably weak defence of the principle involved. . In the first place, the increased price is not “sheer inflation.” Inflation consists of the issue of credit in excess of the quantity of goods upon which the credit can be expended. In this case, £2,500,000 will be placed to the credit of the Dominion in London. That credit can be expended on the purchase of British goods—and no doubt will be so expended by the Government for its own purposes. That the credit is not .directly available .to the farmers to whom it rightly belongs is primarily due to the policy of the Government ■in imposing import restrictions which prevent the farmers or anyone else from spending their overseas funds.

To deny anyone the right to collect funds because they “came down out Of the blue” opens up an interesting issue. If, for sake of argument, the Minister of Supply won an overseas lottery of £ 5000 would he suggest that lie was not entitled to collect its New Zealand equivalent because it “came down out of the blue?” Or if the Minister of Agriculture - was bequeathed £IO,OOO by a, doting aunt in England would he renounce the legacy because to circulate that amount in New Zealand was “sheer inflation?” What is the difference in principle In these cases and in the bonus which Britain has agreed ;to pay the woolgrowers? The only real difference is that part, at least, or the wool bonus is required by the farmers to meet their increased costs of production, and, therefore, is not net gain. Among other things they will be required, by virtue of the bonus itself, to pay higher charges for shearing. The bonus to the shearers, in Mr. Sullivan’s words, “came down out of the blue.” Will lie, for this reason; propose, in the interests, of stabilisation, that the shearers shall not be allowed to collect the higher rate? It is argued that the increase in the price of wool to New Zealand mills will increase the cost of woollen goods, yet no complaint was made of a similar result from the two increases in wages granted to the workers in the mills.

The Government cannot have it both ways! It cannot secure stabilisation by withholding increases to the farmers and grf&iting them to the workers. If one process is inflationary so is the other; the increase to the farmer being less so because additional funds are actually available In London for the purchase of more goods, whereas an increase in wages in New Zealand does not. make more goods available. Mr. Sullivan had a good deal to say on Saturday about the increase in the private income of the Dominion and the decline in the quantity of goods available for conf||tmption. The point is one which should be emphasised, because it is

the product of .the evil financial system which has developed in this country. It is not due to the war nor to legitimate increases in overseas prices for produce which, in the absence of Government interference, provide the funds for additional imports of consumer goods. It is due chiefly to the so-called creation of credit by the Government .itself. From the outbreak of war. to last week the Government “created" £10,000,000 worth of Reserve Bank credit for its own use: It issued this large sum of money against which .po consumer goods at all were available to the public. That is “sheer inflation” and is the direct cause of the present problem. . This, .inflationary policy,, is. not the outcome of. the war; it started as far back, as 1936. In me last five years the . Government has “created” more than £24,000,000 worth of so-called credit. It has put that additional money into circulation without having the equivalent in consumer goods upon which it can be spent. It is this policy which is mainly.responsible for the disproportionate increase in private income of which Mr. Sullivan complains;, yet .the p'plicy ,is still, continued,’; In,.face „of that .it (s. nothing short of absurd to refuse to pay to fgrrners an additional ~.. £2,500,000 which can be used for the purchase of more g00d5,,.. The .inference is that the. Government, is seeking to rob one section in an effort to. offset some of the consequences of its,own disastrous policy. If it is correct,- as was-stated by one speaker, that the people concerned are the wealthiest,, in .the country, then the obvious answer is that it would be good tad.tics to pay out, since as much as IBs in the pound would be recouped direct by -the Government in the way ,of taxation—or more than ' enoughJto pay, several times over subsidy,; if. subsidy is needed, to cover the extra post of wool used by local mills. The, discussion in Parliament has not revealed any real reason why .the farmers should be denied their rights but. it has served to emphasise the inherent dangers of the Government’s financial policy generally.;: w;;.--''--A’,