THE COMPULSORY LOAN

Otago Daily Times, Issue 24417, 1 October 1940, Page 11

THE COMPULSORY LOAN

iO I'HE KDITOH Sir, —Your leader on the compulsory loan, read in conjunction with the survey by Mr W. Downie Stewart, should give the people cause for thought. You profess to be greatly concerned because line Government is not likely to use the fuil amount raised for war purposes. You say, "The principle that every member of the community should contribute to a loan for the prosecution of a war in the interests of the nation is readily defensible.” Most people will support this statement, but many will question whether war has ever been in the interest of " humanity,” which is far greater than the interest of a section of humanity. Furthermore, many will question whether it is in the interest of the people of New Zealand that a loan should be raised and used in a manner that enables a section of people, whether they be workers or moneylenders, to live without rendering useful service in times like the present. Commenting on the loan which is about to be issued, you say; “ There is the unusual condition attached to the loan that for the first three years of its currency i' will take the form of a capital levy, since no interest will be paid upon it for that period, and that the interest for the remainder of its currency will be lower than the market rate.” Mor' decidedly it is an unusual condition; you overlook he fact that we are supposed to have a Labour Government in office. The thing that matters is, Is it just and fair? Is it right that those who enjoy the privilege of living on unearned increment should be asked to make sacrifice? If so, then the procedure is moral and justified. Mr Downie Stewart and you conveniently forget the fact that the workers ar the producers of all tha* makes interest valuable —i.e., goods and services. To propose or to suggest that the working class should be asked to make sacrifices while a section of the community, which is able to render service, is living on unearned incomes, is quite unfair. In effect you and Mr Downie Stewart propose placing the burden on the back of the workers when you advocate paying interest on money raised for war purposes. Speaking of sacrifice, Mr Downie Stewart states that “ the public fully realises the need for a maximum war effort, and that any financial sacrifice it is called on to make is not comparable with the contribution made by our sailors, soldiers, and airmen." Such a statement makes one feel Mr Stewart is only playing with words when one analyses his later statement, for he says the Reserve Bank “ as keeper of the centralised reserves of the trading banks, has the use of big blocks of free money. Moreover,” he says, “as it i; the money-making authority it can, i: ordered to do so by Mr Nash, lent money at a nominal rate of interest 01 free of interest, as in any case its profits go to the Government. Therefore, if the free-of-interest idea is sound, it is far more applicable to the Reserve Bank'than the loans raised frorr the public” In spite of the fact thal he considers that no sacrifice is comparable to that made by the soldier sailor and airman Mr Stewart advocate; a principle that will result in the workers and these people being compelled to carry the burdens, for he says that to pay interest “ is, to his view, wise or otherwise the bank will be robbed of one of its most useful functions, for, if money becomes so plentiful as to threaten inflation, the Reserve Bank can sell securities to the trading banks and thus curtail the volume of money in circulation.” In other words. Mr Stewart advocates that when prices have been raised,, whether it be by modern banking practice or other methods, and money has low purchasing power in terms of goods, the Government should sell its securities for depreciated currency to the private banks, thus increasing the value of the banks’ assets and holdings and throwing thousands of people on the unemployment market, and thus concentrating the ownership of lands, buildings, etc., into a few hands. What a prospect the workers, the manufacturers and working farmers have in front of them should Mr Stewart and his class get control! I suggest to you and also to Mr Stewart that there is one way of raising the necessary money to carry on the war that is fair and iust to all sections—that is for the Government to create the necessary credits to pay for the goods used for war purposes in New Zealand. So far as inflation is concerned it is more likely to result from the present method of paying interest on created credits by private trading banks., to make liquid the securities now held by a section of the people than it would be if the Government created all the necessary credits through the Reserve Bank. In conclusion allow me to say that. I agree with Mr Stewart that Mr Nash has “sold the pass” to his enemy. Mr J. A. Lee. Mr Nash’s proposals admit the possibility of raising money free of interest. Whether the principle is a success will depend entirely on how it is applied. So far as the writer is concerned he has no hesitation in saving that all money to pay for goods necessary for war purposes in New Zealand should be brought into existence through the Reserve Bank or a Government trading bank. The present trading banks should be used as banks of deposit and not allowed to create credits If this were done the burden of payment for the war would be placed on the shoulders of those who now have the privilege of living on unearned increment, and not on industry and the workers. Mr Nash is to be complimented on having made at least an effort to get on the right track: it is to be hoped that the people will compel him to keep on the track I am, etc., C. M. Moss. North-East. Valley. Sept. 29. [No suggestion was made by us that the working class should bo asked to make sacrifices for the benefit of any other section of the community.—Ed., O.D.T.