The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, MARCH 10th, 1925. MONEY AND CREDIT.

Hokitika Guardian, 16 March 1925, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, MARCH 10th, 1925. MONEY AND CREDIT.

An English financial journal remarks that the address in mid-January of the Rt. Hon. R. McKenna at the meeting of the Midland Hank really constituted an essay in economics, and a very instructive one at that. He covered a wide field, dealing with currency values and gold control, the creation and cancellation of credit, and changes in purchasing power, including in his survey also a lucid explanation of the meaning of money. Mr McKennn takes the view that, in forecasting the immediate future of the relation of the two currencies, the pound sterling and

the American dollar, many factors have to lie taken into account, hut ultimately the dominant consideration is the relative movement of prices in the two countries. Price level, 1m added, is dependent upon the quantity of money, the rate at which it is expended, and the amount of goods and services available for purchase. The quantity of money is thus one of the three prime factors determining the price level, and it follows that whatever contro’s the quantity of money is to that extent determining its value. Afterwards lie explained bow the banks create credit, or purchasing power, but said that so long as each hank adhered to its conventional cash ratio their power in this respect is limited by the control oxeriesed by tho central bank, the Bank of England, which alone can supply additional amounts of cash, as distinct from credit. AVhnt Mr McKenna described as a, managed currency lias Imen kept very stable in this country in tlm last three years, but the gold standard, in existing circumstances, has great and striking advantages. In tho first place, it establishes an international measure of value common to the whole world and universally accepted. It is automatic in its operation, and it relieves the central banks of a responsibility which, notwithstanding mir own fortunate experience, might not. always be discharged with the knowledge and judgment indispensable for the prosperity of national trade. In tlm opinion of Mr McKenna, one of the greatest advantages of the gold standard is its moral effect, A nation will think better ol itself, "ill almost regard itself as more honest, it its currency is convertible into gold. Even if tlm gold standard were not preferable on other grounds, its universality would be decisive in its tavour. So long as nine people out of ten in every country think that tile gold standard is the best, it is the best. If in the future, there were an immense inrease in or decrease in the output of gold, and consequently a startling rise or fall in prices, a re-consideration of tlm subject might he forced upon public attention ; but there is no single country, as far as is known to the Chairman of the Alidland Bank, which is now off the gold standard that does not regard the return to it ns the most desirable of all financial measures. At the end of his address, Air AlcKeiina made an eloquent appeal for some relief of the burden of taxation. The pressure of taxes, which is far heavier in Great Britain than in any other country in tho world, 1m said, is too great for the trade to hear. It eats deep into the reserves, which are indispensable for business expansion, and the country cannot develop as it would wish without increased capital resources. “ Every shilling that can 1m saved now and devoted to the relief of taxation,” he added, “ will conic hack to tlm revenue in future years in the larger receipts obtained from, moic prosperous industry. With international pacification and with reasonable reductions in taxation it will remain only for all to unite in one sincere cooperative effort to assure conditions ol lasting prosperity.”