THE TRUTH ABOUT THE SLUMP

Rotorua Morning Post, Volume 1, Issue 34, 2 October 1931, Page 4

THE TRUTH ABOUT THE SLUMP

THE CURRENCY QUESTION A REVJEW BY E, EARLE VAILE. The impression left upon one's mind by a -perusal of A. M. Field's hook "The Truth Ahout the Slump," is that the author's capacity for reading has exceeded his powers of mental digestion. Quotations are made from the writings of a great number of authorise, mostly of the second . and third class order. There is also a decided air of special pleading — of laboured endeavour to eollect evidence in favour. of preeonceived ideas, I really cannot believe in all this deepdied Jewish plotting to ruin the British Empire. What could the Jews possibily gain by it ? They would be destroying the most stable basis j of y/orld finance. \ Gold Standard. This basis of the curreney is the particular bugbear of our author: though in the end he'himself most inconsistently yield3 to its advantages. I readily admit that there are undoubted weakneses and inconveniences in the gold basis to currency: but I seem to pereeive very much greater evils in any other basis that has been suggested. Gold has so very many unique advantages — the greatest stability in production of any commodity: imperishability: portability: eonvenienee of storage, etc, But, after all, the true basis of value, as Adam Smith so well pointed out, is not gold, but labour. Gold is worth £4 5s an ounce because it takes on the average that amount of labour to produce it. The essential weakness of all faiicy and paper currencies is that they are' not based upon labour — the same amount of labour will print a note for either a pound or a penny. While British eommunities "might have sufficient mental balance and self-restraint to steady the speed of the printing press other nation3 certainly would not.

j Mismanaged Currency. Our author is prone to adopt the stress of a "managed" currency based on the values of a variety of v the principal ppoductions of a country. The fatal defect in all such schemes is that a managed business of any kind may so readily beeome a mismanaged business. It may even be dishonestly mismanaged. The management, again, must be either national or international. If national, each country would have a different basis and foreign exchanges become ehaotic once more. If international, are we British going to hand over the basis of our finance to a body consisting mainly of foreigners to "manage" as they think fit? And is it certain that we could find such a body i of men who would at all times resist the temptation to make millions in a minute by even a slight "monkeying" with the currency? Then when and where are "values"- to be assessed? As Paddy remarked, the Lalces of Killarney would easily be worth ls a pint if placed in hell. Then these goods suggested a3 the basis of a manageo| currency are not readily portable and cannot easily he stored on the premises of the financier. He would have to accept storage warrants. And all can remember a most notorious instance in this very country when storage warrants for grain proved fatally valueless to a bank.

Common Denominator. j If international finance is not to get out of hand it must have a common denominator, stable in value, easily transported, easily stored, imperishable — in short — gold. That gold reserve3 have proved insufficient in times of extraordinary stress is not a valid objection. All that we can reasonably ask of any institution is that it will serve all ordinary occasions. The present distresses of the world are not due to a gold basis of the cuirency, but to_ the erection by almost all countries of artificial barriers to trade, which prevent gold eirculating freely in the directions in which it may be required.

Concentration of Wealth I agree with Mr. Field that the concentration of vast sums in the hands of individuals i3 an undoubted evil and ought to he terminated. This could be done without undue hardship or dislocation of business by Strictly limiting the power of hequest: not by the State seizing a large part of the capital of deceased estates and squandering this capital as I revenue, but by placing a 3trict limit on the amount which could be bequeathed to any individual or group of individuals. Power of Interest. I am also in entire agreement with Mr. Field as to the dreadful power of interest. It is the one thing that works 24 hours in the day and 365 day3 in the year without the slightest effort on the part of its owner. The world is divided into two classes — the borrowers who are optimists and the lenders- who are pessimists; and the optimism of the borrowers leads them to pay more for the use of money than it is worth. In the vast majority of cases the lender gains, and the borrower loses. "He who goes aborrowing goes asorrowing." It is a striking fact that one single penny invested at the time of the birth of Christ at 5 per cent per annum, compound interest, would by now haye amounted to vastly more than the whole of the wealth of the world. Interest is a dread power and the only way to curb it is to stand off the market and let the moneyowner use his money himself. It is very curious that Mr. Field after expressing such a horror of interest — even going so far as to say that lenders should pay borrowers for takadvocate the ending of rent by the ing eare of their money (!) — should qdvoeate the ending of rent by the creation of interest bearing bonds that can never he dedeemed.