The Daily News. FRIDAY, MARCH 19, 1920. MONEY AND GOODS.

Taranaki Daily News, 19 March 1920, Page 4

The Daily News. FRIDAY, MARCH 19, 1920. MONEY AND GOODS.

In an admirable lecture delivered recently by Professor B. E. Murphy at the W.C.T.U. Convention, on the subject of the cost of living, he stated that the problem was one of price, and that price was an exchange of money for goods, so that alterations in price were due to causes affecting either money or goods, or both. It is necessary to thoroughly realise this fundamental truth in order to understand the main cause for the abon the subject of the cost of living, It is of importance, therefore, to note that the price level depends on the relation between the quantity of money and the quantity of goods in the widest sense. If the money supply outruns the goods supply, prices will rise, and vice' versa. It is well known that the country is at present flooded with debased paper money, but there is no evidence that goods have increased. Money has more than doubled; so have prices, yet while there is more money in the country than ever before, it is worth far less than it used to be. The extent to which the currency of the world has been increased since the commencement of the war is alarming, especially in faose countries which participated in the war. For instance, the increase in the note issue of the Bank of England in 1920, as compared with 1914, amounts to £61,376,000, that of the Bank of France £1,258,507,000, that of the German Imperial Bank £1,543,179,000, that of the Austro-Hungarian Bank topping the list of increases with £2,072,700,000, while New Zealand's note issue increased from under two millions to seven and a-quarter millions. It is possible that the total increase of the world's paper currencv since the war began would not be less than £6,000,000,000, besides which enormous loans have been raised. " During this process of inflation of the currency, goods have decreased instead of increasing, so that the vastly augmented amount of money is doing less work than the comparatively small amount was do-' ing before the Avar, therefore money now only goes half as far. The over-production of money and theunder-productionof goods have forced up the cost of living, and the more money that is poured into circulation, the higher will that cost soar. The inflation has enriched some, plundered others, and struck at the foundation of the economic structure. The main factors influencing the present unsatisfactory economic position may be stated as shoddy money, restricted production, a tendency to indulge in luxuries and extravagance, the higher standard of living demanded by the people, and the shortage of goods. There is an urgent duty on the part of every Government to take steps for the deflation of the currency. The lessons of history should not be ignored for, as Mr. Goodenough emphasised in an address recently delivered to the Kek'.lev and District, Chamber of

Commerce: "Unsound currency is like an evil habit which takes possession of its. victim, and is only thrown off by a great effort and by great determination. If notovercome, it fastens on its victim, i and undermines and destroys the health, and is productive of misery and suffering. The longer it remains unchecked the more difficult it is to conquer." According to Professor Murphy, nothing can bring down prices like the creation of a public opinion hostile to inflated currency, an opinion that would prohibit the making of any more bank notes. It is satisfactory to note that the British Government is taking steps towards readjusting the currency by reducing the National Debt, and by ceasing to borrow in order to balance current expenses, Jbut the British Chancellor of the Exchequer, in common with the Ministers in charge of the finances of other countries, finds that the national expenditure keeps soaring upwards in consequence of special demands arising out of the war and incidental to repatriation, so that taxation must necessarily be abnormal for some years to come. Assuming that the over-produc-tion of money is remedied, there is still to be faced the under-produc-tion of goods, hence the necessity for a restoration of improvement of industry, for increased production is an absolute necessity to bring up the supply of commodities to a' standard that accords with the currency. The cost of production must necessarily increase with every rise in labor and materials. Unfortunately this rise takes place in a vicious circle, and being unaccompanied by a greater output, the economic situation grows worse instead of better. Great as is the prosperity of the Dominion, it is at present based on an unsound foundation — that of prices and not of enlarged production. Evidently this state of affairs cannot continue much longer without being in danger of creating a condition that may be disastrous to the country and its people. At present the Government is more concerned over obtaining revenue than in keeping strict control of expenditure, and until the Government gives the lead in lessening the burdens of the people it is not to be expected that the people will eliminate luxuries and practice economy. The whole, problem is governed by the relative values of money and goods, and the key whereby that problem can be solved is greater production and less money.