AFTER-WAR PROBLEMS.

Taihape Daily Times, Volume XI, Issue 3509, 22 June 1920, Page 5

AFTER-WAR PROBLEMS.

DEFLATION OF CREDIT. BANKING AUTHORITY ON "DISASTROUS CONSEQUENCES. Of the recent inquiry before the Select Committee of the House of Commons into the question of the taxation of war-time increases of wealth, much has been written. The views of the banking institutions of England have not been freely quoted, and therefore the following condensed from "Lloyd's Bank Financial Report" is published in the "New Zealand Times*" as indicating'the expert banking view of a problem of worldwide importance:

"A concrete proposal was put forward for the taxation of all increases of wealth which might be shown to have accrued to individuals by two comparative valuations of itueir property of all kinds, the first to be made as at June 30th, 1914, and the second as at June 30th, 1919, with an exemption as regards all individual estates which, at. the latter date, did not amount to £SOOO, and certain other exemptions. WHERE THE SCHEME FAILED. "As the basis for this scheme lh-3 board had worked upon an estimate, made by Dr Stamp, G£ the increase of

wealth during the war, which estimate, made by Dr Stamp, of the increase of wealth during the war, which estimate was admittedly made upon the footing of a comparison of the values of all commodities and forms of property by referenceto the £ sterling at the two dates, and upon this the board built up an alleged increase of taxable wealth of approximately four thousand millions.

"Thus the whole scheme depended upon the existence of an increase of the wealth of the community as a Whole, as a result of live years of the most devastating war which the world has ever seen! It would, we think, startle most people to be told that the nation was infinitely richer, instead of being, as we had all thought, infinitely poorer, as the result of ibe war. ' The root fallacy of the whole proposal is, of course, the suggestion that the wealth of the nation can bo measured by reference to the purchasing power of the £ sterling at two different dates and in circumstances which render any just comparison impossible. REDUCTION OF FLOATING DEBT. "The inquiry appears to have reduced itself to the question of how to procure a reasonable, steady and safe reduction in the amount of the floating debt which is at present about 1200 millions, of which 200 millions are 'ways and means' advances, and this is a subject to which tha committee can usefully devote their labours, if, indeed, it comes within the scope of their reference. "Into the vexed question whether, and how far, any sudden deflation of credit by the cancellation of any considerable portion of the National Debt, floating or otherwise, is desirable at the present time, or what effect it would have on prices, but we may point out that there are many who consider that, at the time when ail the capital and credit legitimately available are required for the recovery of trade and commerce upon which the improvement of the country's financial position mainly depends, and sudden deflation of credit might have the most disastrous consequences."