INFLATION

Otago Daily Times, Issue 24422, 7 October 1940, Page 11

INFLATION

TO THE EDITOR

Sir,—ln a sub-leader of Saturday in which you criticise Mr Nordmeyers speech on war finance, you say. “ Even advocates of monetary reform may. however, be apprehensive of the effects of inflation of the currency. . . .’ What is inflation? If. after the creation of a certain volume or quantity of goods and services, the money to pay for them is raised in the form of a loan from either the public, the trading banks, or the Reserve Bank, would that be inflation, and. if so, why? A reply from you would help to clear the air and would be appreciated by many of your readers. —I am, etc.. M. Silverstone. October 5.

[Mr Nordmeyer himself may answer Mr Silverslone. “It had always to be borne in mind that no matter how much anyone might wish to use those credit facilities’’—the credit provided by the Reserve Bank—” they could not. without disaster, be extended beyond the noint that the goods and services were available.”—Ed. 0.D.T.l

TO THE EDITOR Sir,—lt would greatly enlighten the nublic if Mr Nordmeyer or any other financial expert would more fully explain the financial activities which bring about disaster arising from currency inflation. Not one in a thousand can see the danger Mr Nordmeyer points out when he says: “ It had always to be borne in mind that no matter how much anyone might wish to use (Reserve Bank) credit facilities they could not without disaster be extended beyond the point that goods and services were available.” It is not generally known that the greatest living authority upon inflation is Mr J. M. Keynes, who says: “Under (he influence of two forces —the financial necessities of Government and the political influence of the debtor class—the progress of inflation has been ‘ continuous.’ if we consider long periods ever since money was first devised in the sixth century B.C. Sometimes the standard of value has depreciated of itself: failing this, debasement has done the work.” This brief quotation is not sufficient to enlighten the public of the danger to which Mr Nordmeyer alludes, but it significantly indicates that a pernicious influence has constantly been at work for ages and periodically culminates in a financial crisis. The task now faces the Labour Government, which inevitably will be blamed for any disaster arising from currency inflation. Apparently the majority see no danger, but that is, because the majority are not financial experts, and

do not understand how inflation destroys the purchasing power of money. But for this fact there would not be much to fear from inflation. —-I am. etc., W. Sivertsen. Dunedin, October 6.