CURRENCY QUESTION

New Zealand Times, Volume XLVI, Issue 10612, 10 June 1920, Page 6

CURRENCY QUESTION

CAUSES OF INFLATION INTERESTING ADDRESS BY PROFESSOR MURPHY, A PROBLEM AND THE REMEDY. Before an audience of between three and four hundred city men—commercial and professional—Professor B. E. murphy, of filio chair of economics at Victoria College, delivered an address on “Tho Currency Question” last night. The address was listened to with the greatest interest. “Currency discussion is now familiar and in tho air.” said Professor Murphy, and this was only natural, as men do not worry over their health .when well, or over their money when it is well. It is not well’ ati present- — (laughter)—and here doctors don’t differ.” Ignorance on these matters was. Professor Murphy pointed out, too profound among well-informed business men, while another factor was that the teaching in tho secondary schools was quite wrong. Vital matters were neglected, and too much time wasted on languages, dead and half dead. As a result of the war and its aftermath, a sound knowledge of currency and other economic subjects was of vital importance. There were two forms of currency, natural, automatic or self-regu-lating, tho result of economic development, and the survival of the fittest, but abandoned on the outbreak of war, and artificial or managed was substituted, and that method New Zealand slipped into ah tho beginning of 1914. Now money had a certain job to perform. and the problem was that wo were trying to make an artificial currency do the job of a natural currency, and it was noh doing it well. Let them trace the growth of natural currency, consider its job, and then see where a managed currency fails to do it. From the beginning of tho present century up to 1913 or 1913, he pointed out, the cost' of living in New Zealand, according to the most careful estimates, had risen 16 to 30 per cent., in conformity and sympathy with the rise in the cost of living all over ’the world. But after the war broke out. and in the space ot five years, it had doubled or more than doubled. In England there had been a rise of 200 to 300 per cent.— nearer 300 tliah 200. VVhy had tho cost of living doubled, and to whah extent could it have been prevented ? Summed up, the soaring cost ot firing was due to an over-production pi currency and an under-production ot goods. How our currency had oeen inflated in New Zealand could be seen from the fact that in 1910-13 the averace number of notes an carciuation "was in 1914 the number cn to l.mOOO: m l?lo to _ 2,800,000, in 1916 to 4,000,000; m 1917 to 5.000,000 ■ in 1918 to 6,000,000; and in 1919 to over 7,000.000. NEVER MORE MONEY THAN NOW. Could they wonder that people said there was never so much money m circulation in New Zealand before. The doubling of the cost of living was due to tho fact that there was twice as much money doing the same work as in 1914. Mr MasseV had often said that the cost of living was due to the fact that currency had inflated, it he believed that, why did ho not begin to deflate such currency? it was stated by Lenin that there was no subtler and no surer means of overturning a country than the present state of debauching the currency, thereby scaling down the wages of the workers and scaling up the profits ot capitalists until the inevitable ciasn came. Every additional £IOOO of paper currency issued meant the lowering of some poor man’s wages, and the inflation of the rich man’s profits. In consequence of tho war, there was a net shortage of necessities. Another cau'te of the increased cost of living was the wholly admirable determination of the workers —a determination in the best interests of the nations—to live on a higher and better plane. (Applause.) That was,-per-haps th o ono innocent cause in the rise of the cost of living. Another cause, as to the innocence or otherwise of which ho would not then pronounce, was the go-slow policy arising from the strained relations of Capital and Labour. Yet another cause was foolish and extravagant expenditure on non-essentials. Tho greatest causes were the over-production of currency and under-production of goods; and to remedy the matter, wo must deflate the currency, keep down tho tariff, produce more, arid give up extravagance. (Applause.) DEVELOPMENT OF MONEY. Continuing, Professor Murphy spoke of the development of money, and said that a gift evolves into a barter and a barter intp money, and by tho straggle for existence the money must liavo had tho full commodity value. The most important qualities wore the original commodity value, and tho stability or durability, portability and divisibility. Gold was stable in value and was of a high value in bulk, and because of its portability it could bo transported from place to place at little cost. It could bo turned into bullion, and bullion into gold. The functions of gold consisted of its medium of exchange, a.nd being an immediate exchange, it operated as a prominent denominator, whilo it acted as a standard of value of deferred payments. Gold was not quite stable, but was the host metal both as a store of value and a means of reckoning on future contracts. It possessed tho qualities and did tho job better than anything else available, and being costly and expensive to got, 'society sought a. cheaper medium—paper. ' Since wo departed from gold currency, strikes were the cause of the collapse of the standard of deferred payment?. ORIGIN OF PAPER CURRENCY. In the time of Charles 1. he turned his gold into treasure at the goldsmiths, and the goldsmith gave receipts which afterwards turned out to be our first bank notes, which were called representative money, but backed with gold. There were three types of paper money, representative, judiciary or convertible, fiat or inconvertible, and the limit of issue was exceeded by all Governments, being used as a fiscal instrument to raise an easy loan. It was ono of tho most expensive forms of borrowing over devised. The over issue of notes only served to upset contracts, fiscal cn-, gagemeiits, and cause strikes. _

THE REMEDY. Professor Murphy added that ho was sorry to say tna-t newspaper men and business men failed to understand the psychology of tho working man—ho wa» a decent hard-working man, and it was a pity that things could not be straightened out. “Our country ” he said, “is deluged with shoddy ’paper money which upset the standards long fixed, and ba.d caused un-