MONEY: A SCHEME

Rotorua Morning Post, Volume 2, Issue 387, 23 November 1932, Page 2

MONEY: A SCHEME

economic cauldron PRODUCTION HAS GROWN * FASTER THAN SYSTEM * OF DISTRIBUTION. REFLECTIONS ON CURRENCY.

(Published by Arrangement with the

iM.Z. Farmers' Union, . Auckland - Province.) ....

Writing under tbe nom-de-plume of "Jack Cherry," a- contributor has the followiiig in the Pictorial Review. Economically the -whole of the civilised world is in the soup. The cauldron of economic prohlems has hoiled up until it has emhroiled us all. Great Britain, the United States, the United States, Franee Germany, Italy andth'e nations of central Europe have all suffered alike. Reparations and war dehts, high tariffs and colossal budgets have all helped to make more difficult the broken roads we have had to travel in these years of aftermath. The organisation: of production has completely. .outgrown and outstripped the system of distributing goods. During the war each nation had, very largely, to fend for itself. Countries which had depended upon British exports to supply their needs had to learn to produce for tbemselves, and since the war the export of capital has helped to intensify this urge towards self-sufficiency. In- the endeavour to recover and to expand markets, price s have been forced down to a level which is frankly uneconomic, and 'to ' achieve .this end in certain countries wages have been cut to a level .whiqh does not allow the worker to live' decently. Need for Rise in Prices. Now "statesmen-in all countries are talking of the necessity for a general rise in world prices, and for inflation. That means that as prices rise more money will he put into circulation, so that incomes, wages and salaries may rise as well.

But this, to be successful, calls for a eonsiderable measure of international agreement. Later in the year there is to ihe an International Money Conference, when a definite attempt to reach such an agreement will be made. At the Empire Conference h'eld( at Ottawa a plan was discussed for creating a new money system to he used within the Empire itself. This new money, if it is introdueed, will be interchangeahle legal tended for the payment of debts or purchases between Great Britain, the Dominions and the Colonies, but will not he used • for the purpose of foreign exchange or for the payment of dehts to foreign countries. Thus we will have two different kinds of money, one for international use and one for Imperial and domestic use. Both these plans indicate clearly the same fact — the growing recognition that the money problem is the keystone of our present difficulties — that it is indeed "the supreme economic problem of the age. And now there has arisen a new school of thought which is concerning itself vitally with the money problem, and about which' the nation will hear much in the future. Its exponents have little or no patience with those who advocate inflation as the bankers and industrialists understand it, and they regard the creation of an Empire currency with hut lukewarm enthusiasm. The Prime Minister has said: — "If you are going to wait for an international solution you will go on waiting. International action is too slow and complicated, and in any case it ig imp'ossible to fix and regulate world pi'ices by any such method. You must save yourselves nationally by your own efforts, and the world, perhaps, by your example. Take the manufacture of money out of the hands of the Bank of England by suspending its charter. Make more money tokens and give them away in the form of a national dividend." At flrst sight the idea of giving money away in tbe manner suggested is so original and unusual as to almost take on'e's breath away, but further reflection will show that the scheme is the result of care'ful thought and study,- and not merely a sensational stunt engineered by cranks and faddists. Thinking Straight. It is difficuLlt to get people to think straight about money — its manufacture and control. For most of us it is surrounded by an aura of semi-magi-cal mysticism which we are content to dismiss under the term "high finance" and leave it at that. Nevertheless, the subject is one of absorbing interest when we look into it. At present the value of British money and the control of its supply is carried on by the Bank of England along lin'es which have been established practice for many years. That practice says there should be in existence a total volume of currency which is equal to a tenth of wh'at the nation is expected to earn in the year. This is made up at the moment of £360,000,000 of one-pound and tenshilling notes, silver and copper coinage, and £20,000,000 of "fivers" and notes of higher denomination. These are issued expressly on the good faith of the bank itself, but the notes we more commonly see are, to a limited but fixed extent, secured hy gold'. The amount of gold so held is normally £110,000,000, and the liotes in excess of this sum— normally £250,000,000, but now £275,000,000— are called the fiduciary issue. But not all of this money is kept in 1 constant "circulation. Much of it is held in reserve hy the bank. As each note returns to the bank it is cancelled and a new one is printed in its place. No hanknote ever leaves the Bank of England twice. The new noteh, however,\are not always immediately released.\ Every Friday morning there appears in the daily newspapers a staterhent issued by the bank which gives the actUal details of the money situation. At the moment of writinb- the- latest statement shows that in addition to having sub- ' stantially . increased its holdings in ; i gold, the issue department of the hanlc is holding over. £45,000,000 of notes. It is this holding of money out of a fixed and limited volume that the new money reformers are protesting against. A Means of Exchange. Th'ey argue that the chief function of money is to he a means of exchange * !' > . ;*>'

hetween those who make things and those who require them, and that, therefore, the: amount of money in circulation- should depend upon the volunie of goods in the market. The total amouht of money, then, which passes through our hands should he made to equal the total retail prices of goods offered for sale at the . time. Purchasing power -will then balance production, and as goods and commodities are made thej- money must be ilitroduced in order to permit their purchase. As industry recovers and the workers- to re-ahsorh into emplayment, therehy increasing output, so the volume of money must be increased in proportion. They insjst that tbe money must be given away periodically as a national dividend. As the nation's wealth, represfented in . goods and power to increase the supply of ghods, increases, so will the public's means to buy and cousume them he increased. It is necessary to emphasise that this proposal is not the work of people wth an axe to grind. It is put forward as a business proposition purely and'simply, as a -practical means of escape from the economic vortex in which the nation is caught, for the consideration and action of experts. _ "Money for Nothing." — Official. Its sponsors inelude such men as the Marquis of Tavistock, Professor Soddy, Major Glassbrook-Richards (who is instructor in Eeonomics at Sandhurst), Cojonel L. T. Maude (a War Ofiice expert), Major. H; O. Daugens and Mr. A. -R. Orage. None of them is connected with party politics in any way, but they1 are recognised as experts whose opinions have been heard in evidence before Royal Commissions and Committees of Inquiry set up by post-war Governments to investigate various aspect of tne problem of currency, credit finance, industry and trade.

Alternative plans, for the practical distribution of a national dividend have been worked out in concreto detail, and, to let the cat out of tbe bag, I can say for a fact that one of these plans has been receiving expert official consideration at the Treasury for some months — since shortly after the crisis in last August, in fact. I can go even farther and say that the official view is that in the event of the economic situation reaehing the point of emergency the plan will in all probability he adopted. There are two plans, and both have two parts, one dealing with immediate action and the other with ultimate

policy, for the dividend would not be declared once only. It Would become a regular and permanent feature of our national life. It is agreed among the auth'oT^ of the scheme that in order to clear out all the existing stocks of goods and put industry in a position where it can function to capacity, the existing purehasing power of the public should be doubled. The issue department of the bank would therefore he instructed by the Treasury to print the new notes required. Under one scheme the Treagury would hand over to the post office, working on the census figures and the registers of electors, dividend warrants made payahle to the heads of families and to individuals who were unmarried and had no families, the dividend being fixed at so much p-er head of population, the man with a family of four receiving four times the amount of the hachelor. The warrants would be cashed at the nearest post office, subject to their endorsement. Tlie new notes would he specially marked, and they would not he usable for investment purposes, but only as payment for purchases. Production Census. Thereafter the figures relating to bnths and deaths would be instantly analysed, and a constant census of production would be maintained. From the information gleaned a /regular dividend, varying in amount according to the circumstances, would be declared half-yearly, in the same way as a limited liability company declares L J Vld0nd- But in this case «verybody, from dukes to dustmen, would be regarded as a shareholder in Great Britain Unlimited, the greatest concern on earth. The amount of these regular dividends would depend upon. the amount of goods remaining unsold and the velocity with which money was circulated. y .,Th®. ®ep,on4 plan d°es not allow for the distribution of money to the pubic at all. Under this schem© every retailer of goods would send the invoices he receives from the wholesalG1's ^ a specially-created department oi the Treasury, with a declared statement of their retail value. The Treasury would then issue a warrant cheque for half the amount which the bank would have to credit to the retader s account when he paid it in. The retailer would then have to sell 1 S0°ds for half their retail price. . ,In waZ every pound that goes into your poeket will be made to huy two pounds buys to-dav. This proeess would be continuous, the amount of money in circulation corresalariesf *° ^ b — These are the simple outlines of detafi 6SrT ? °Ut dpwn t0 the Ja-st Indeed, other countries are considermg them too. The Marquis o± tavistock is connected with1' an. organisation which is pressing the ad~ vantages of these ideas upon the Treasui'ies of other nations. After all, there is nothing really new in the suggestion of giving money away. Old age pensions, before they were put on a contributory basis, were given away, and to-day the Public Assistance Committees are giving away money and money's worth to those who are economically destitute. It is all a question of degree and purpose. Charity in the Right Place. The new money reformers support their argument with a master trump. Eveiy. economist in the world knows that international trade to-day means giving goods away. The export of manufactures, because there is not enough money in the home market to • huy; them, is done on credit. At least half these credits, it is realised, have to/ be extended hy other credits, and at least half the goods so disposedL of will never be paid for either in cash' or kind. Giving money away is merely a matter of letting charity hegin in the- right place. Anyway, much more is going to he heard of it.. . Has the- road to the age- of plenty at last been discovered? Is this the solution of "the supreme economic problem of the age?"