HARMFUL POLICY

Gisborne Herald, Volume LXX, Issue 21112, 4 June 1943, Page 2

HARMFUL POLICY

CREATION OF CREDIT WARDING BY MINISTER “CHAOS AND DISASTER” (P.R.) WELLINGTON, June 4. “It has been suggested by many good, citizens, who have not fully examined the effect of their proposals, that the full cost of the war should be met by the issue of currency froni the Reserve Bank,” commented the Minister of Finance, the Hon. W. Nash, in his Budget address in the House of Representatives last evening. “This is such an easy road that if it had good foundations we should follow it, but the facts of life prove that it would lead to chaos and disaster.

“The standard of life in a community depends upon the amount and the kind of work done. If the right quantity of the right kind of goods and services is produced and equitably distributed among the people, the standard of life is high, regardless of money. Conversely, if the volume or quality of the goods and services declines or is unfairly distributed, the standard of life falls, regardless of money. Money is necessary as a medium of exchange, and if there is sufficient money in circulation already, the creation of more would not remedy a decline in production because in such a case the decline would not have been caused by a shortage of money. Tco Much Purchasing Power

‘‘At the present time there is ample money in circulation to enable the people to purchase necessary goods and services as they become available day by day. Consequently, harm and not good would result in the further increase in the supply of money, as would arise from the use of Reserve Bank credit, except in extreme emergency—and for which even then the price would have to be paid. In fact, what is wanted is the syphoning off of any excess purchasing power for investment in war loans in order that diversion of productive effort to war may be matched by a similar diversion of purchasing power. Only by these means can we remove the pressure that threatens to upset our economic stability. “Taxation takes from all largely in proportion to their ability to pay the moneys required to carry on the war and national activities. Creation of credit under certain circumstances takes away by unseen methods the value of work done and savings made, and ultimately in the form of price increases hits those most who have to spend their incomes on necessaries of. life. Loans borrowed from those who have worked and saved the result of their labour diverts these savings to the war and national efforts, and the amounts will be repaid when war needs are satisfied and production is once again based on civilian needs”