Untitled

Hokitika Guardian, 31 March 1931, Page 4

The financial troubles of Australia are being heaped up. Apart from Mr Lang’s latest and greatest blunder in the world of finance, Mr Theodore's fiduciary note issue is calculated to do great harm. Many economic lectures are being given through the press on the subject, for the effort is going to induce serious inflation with its attendant effects. As one writer in a Sydney paper rather sanely points cut, the real .problem of ialiation is the oroblem of the behaviour ot prices, exchange, prduetion, and trade generally under the regime of inconvertible paper money. Inflation always starts by an increase in expenditure, and must continue until expenditure is reduced within the scope of revenue. If the Government resorts to inflation. whether to meet its own deficits or in some attempt to regulate the price level, it cannot- control it. but drifts from one issue to another, unless it ieduces its expenditure and balances its Budget. The real danger ol inflation is that it is a symptom, and not a eause; the cause being the fundamental policy of Government extravnvagne. At the same time, it is not necessary, providing fundamental

policies are sound, that inflation should involve a country in ruin, Confidence is the touchstone of every monetary policy. The laws which limit the amount <>i note circuhuiou of credit are only important in as much as they may lame i-in-fideni e, and prevent mistrust of political manoeuvre But in all species ol moiietaiy policy economic reactions are not the only influence. Public opinion, ratio-nil or irrational, may out weigh ail other factors, if the public lias confid nee in tin* Government, inflation may produce lower, instead ol higher, prices, provided that inflation is accompanied with -constructive measures. People to-day are afraid ol inflation because they tire afraid ol the political incompetence which lias produced it. and is likely to continue it. It is lie-cause inflation is regarded by the noo-cconomists as a proper substitution for the spirit of hard work and providence. that people after the experience of Germany. Russia. France., and other countries, arc terrified of it. .Moral Ter e is the i-oiitroliing factor in all monetary considerations. if people have confidence in the Government, reasonable inflation will not harm the country, hut confidence has been well described as a mental attitude, which can sink to zero. One is very much afraid that in Australia to-day confidence in its Government is at zero, which is why inflation, as represented hv the proposed fiduciary issue, is highly dangerous