WELLINGTON NEWS

Hokitika Guardian, 6 March 1931, Page 2

WELLINGTON NEWS

INFLATION. (Special Correspondent.) WELLINGTON, (March 4. The Federal Treasurer, Mr E'. G. Theodore, lias decided upon inflating the Commonwealth currency by £lB,000,1)00 to pay the wheat bonus and pay for unemployment. This is to be known as a fiduciary issue, that is based on the credit of the Commonwealth, but'as’that credit is at zero and the notes of the Commonwealth Bank are at a. very big discount in relation to British pounds, the fiduciary note issue will lie discounted from the start. It is inflation pure and simple, and it is obvious that the Federal Government is deaf to the teachings of history, otherwise they would he aware of the disastrous effects of inflation. Argentine eedulars, French assignats, and; more, recently German marks all furnish the dangers of inflation.

There are two methods of inflation. The inflation that results from the debasement’ of currencies has been practised by rulers from time immemorial. In former times faked money was circulated in which, the gold or silver contents were reduced below the amount of their face value. History is full of the records of the peoples’ sufferings when rulers wei'e prepared to.defraud their subjects in this manner. 7 The execution of Charles the Hirst can be finally traced hack to the general misery created hv the debased coinage that ceased to be feinted to pay- for the extravagance of his court and his mistresses. In modern times the debasement of the'-currency takes another form. People all over the world accept paper tokens in place of actual coin on the understanding that' they can ; change them for gold to the amount of their face value. There must therefore always be a supply of gold in the banks’ vaults sufficient to meet , all’reasonable demands. The debasement of the currency begins when the Government issue notes in excess of the amount for which a given gold reserve lias been set aside. A writer in an Australian paper points out that the Government had already stopped the circulation of gold before inflation bad set in, but the note issue is not yet actually in ex- . cess; of. the required •• gold reserve. The whole country knows that the extravagances of the Government cannot be covered by taxation, and will eventually have to be met by further issues of paper notes. The threat of inflation produces the same effect as inflation itself. The export of gold •(’’being ’prohibited the exportation of capital takbs its place. People are will ling to pay 33 per cent, to get their ; capital lodged in places of safety, hnvhich indicates that the present value of an Australian bank liote is only 14si The Government to‘placate its Supporters and keep a hold on the sweets :: ’-pf office will issue pit per money and hiore paper money until the calamities

of. tlio whole country put an end to ■ nefarious career. There is very .rTi|tlc 'difference between the. - modern ."■"pQliticjan and the ruler of' former t'ffl-es. Tire politician pays for his ex- ' fiSyagance with worthless paper and /•tlie monarch paid for his amusement .'wtyh worthless coins. In both cases , the proceedings savour qf forgery. WHERE IS INFLATION, TO END? must- end in one of two ways, .either by-the restoration of the gold basis or in bankruptcy-. Lord D’Abernon was British Ambassador at Berlin from 1921 to 1926, but he was a hanker before becoming a diplomatist, lie records that as far back as 1921 he urged on the German Government -the necessity of stopping the issue of ■ pjtper money and creating a stable currency. The political leaders all pfcadod ignorance of the subject, and said that their financial advisers-—includ-ing ail the bankers in Berlin, not omit, ting the President Reichsbank, unanimously declared that any cessation of note printing was impossible. . They contended that the continuous gild rapid fall in the exchange was due to quite other causes, the usual views being that it resulted from an unfavourable balance of trade. In August 1923 the arch-priest of inflation stated the Reiehbank was issuing 20 millions of now money daily. “Next week (be declared) the bank will have increased this to 46 millions daily,” It was the townsfolk who produced no food who suffered most while the big.industrialists and yeoman farmers throve on inflation. The Federal Government is playing a risky game.