INTFLAED CURRENCY

Hokitika Guardian, 3 July 1920, Page 4

INTFLAED CURRENCY

(Contributed by “X.”) In a series of articles i contributed to the “Guardian ” during the war I dealt —or endeavoured to deal—with certain phases of economic problems which since thou have loreud themselves very prominently into public notice. 1 have neither time nor intention to enter into this matter; hut it may ho remembered that J emphasised the fact that under proper safeguards paper eurreney might he used for its legitimate purpose—the unit of exchange or barter of wealth or commodities. 1 also cm deavdiired to point out that the real issue was only confused by consideration of what amount of gold backing tliei-e may bo behind such currency. Tho real difficulty was that if wealth—for tho exchange of which currency was issued—disappeared, or was destroyed, the currency then became in excess of wealth which it was supposed lo represent. | But the real trouble was, not that there was too much currency, but that there was too little wealth, and the obvious remedy was to increase production of wealth, not to endeavour to decrease the amount of currency, which il legitimately issued—that is to say if issued only in return for labour used and wealth produced—must eventually attain again its normal, or face, value. The following extracts which hear out these contentions may make the position plainer, and are worth noting just now, when utterly fallacious ideas about development of a country being limited in some way by its gold reserve are being circulated w INFLATED CURRENCY AND COST OF LIVING.

“ The position of the United Slates with regard to its inflated currency is hut little understood,” observes “American industries,” in a critical review of n. speech by Mr Speaker Gillett, of the Federal House. Mr Gillett was reported as saying that the present high cost of living “ resulted largely from the greatly inflated conditions due to the floating debt of $4,000,000,000 in treasury certificates.” He is also quoted as declaring that the principal • means of bringing down the high cost ol living is thrift on the part of the pifblic, and that unless the people save, the country will face a panic like that of 1893. He is also represented as saying that the country’s financial interests are built like a pack of cards, aud-U-nlcss the public exerts due care and eliminates luxuries they will collapse. Commenting on the errors of his conclusions, thc New York “ Journal of •Commerce” says:—“ ft is certainly desirable that extravagance and waste be avoided and reasonable economy bo practiced. That will make recovery more speedy, but this way of accounting for the actual cause of the high cost of living, so often reiterated, is. simply absurd. Financial agencies generally understand the real cause, regard it quite seriously, and arc seeking to apply the means of averting serious eonsesuences. The actual cause lies in the huge destruction of values in the past and the impossibility of speedily reproducing them or acquiring them from existing sources. Any waste or extravagance may slightly aggravate the condition, hut only slightly. It is a simple tact-, easily understood, that the awlul destruction of goods, paralysing the means of producing more, squandering billions of value on tile implements of* slaughter and greatly weakening the forces of new production, can have only one result, and that one which it. will take a good while to overcome. Cost ol living is greatly increased because so much of the means of living i< disposed of in the markets of other nations which need it so much more than we do, and will make any sacrifice or incur any indebtedness that they can in order to get it.” "We cannot escape the consequences of these years of destruction, and it for our future interest to do all we can for the relief of those who are suffering so much more than we are. There can he no miraculous escape from the load piled up by destruction. It is putting the cart before the horse; however, to say that it is this volume of currency that is responsible for all our high cost of living troubles. The currency came into existence in response to a demand for it in order to buy the engines of destruction.