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Hokitika Guardian, 21 December 1920, Page 2

Thf, announcement that the Government ha* authorised the banks to increase their note issues to the extent > that they may make advances against j wool is another proof, trenchantly com- ' nients the “Lyttelton Times” of how ! far the country has drifted from sound 1 lines of trading and of public finance, i The practically unanimous opinion of economists all over the world is that ! one of the evils of the time—though .to ; some extent, admittedly a necessary j evil—is the huge inflation of currency ■ that has taken place during the last few | years. It has been understood that the ' New Zealand Prjme Iflinjstpr subscribed to this view, for he has on occasions, ! when discussing the cost of living, spok- j en of the deflation of currency as an ini- ; portant factor in solving the problem. Obviously, if the'amount of currency 1 appreciably increases there is more so j called "money” bidding for goods and i prices must rise. in this country the ' amount of paper money floating about is certainly excessive, and large Govern- j ment borrowings will not make the po- j sition any easier. In fact, the banks are now authorised to issue notes to cover advances for tile six million, loan, and on top of this there is tins new extension in reference to wool. We very, much doubt if the leading hankers of the country approve of this policy, favourable ns it is to their institutions from the viewpoint of profit. Indeed, in regard to advanced for State loans •and to wool growers the real effect of the pojicy, i< the hanks and their customers choose to makp fn}l use of it, is to relieve them from the ordinary risk of business and transfer it to the taxpayers of the Dominion. The scheme to hold wool for a rising market is in itself an exceedingly linznrduous pro- I position, even if the owners of the wool took the whole of the risks. To place 1 the burden of possible losses on the shoulders of the taxpayers, if tlio specu- | iation should prove disastrous, is had ; enough; hut to include in this policy 1 an expansion of the currency when ail • competent authorities insist that inflation is now a real and serious evil ■ anid that its tendency must be to in- i crease tho cost of commodities, seems i to us just about as unsound ethically I and economically, as a public policy could he. In our opinion the Government. has not the least right to pledge the taxpayers to pay a wool-growers’ overdraft, if lie should fail to pay it himself ,and it is no part of the State , to bo trying to prop up falling markets. As a matter of fact, Mr Massey ! has said again and again that the cost ! of living problem can only bo solved by j economy nd increased production, which combination must lower the level of j prices, through tbs' operation of the law j of supply and demand. Yet as soon as ! tho supply of wool exceeds the demand, I the Prime Minister advises that the law | of supply and demand should bode- ■ feated by the with-liolding of the pro- j duco from tho market, which means ' from the people. Not content with im- ] posing this injury for tho purposes of | his precarious and inconsistent plan lie places the risks, in the last resort, up- j on tho taxpayers and authorises a further inflation of note currency to bo issued by the hanks that are to take the profits but not the hazards, of extend- 1 ing credit to woolgrowers.