BOOM AND SLUMP

Wairarapa Times-Age, 5 September 1938, Page 3

BOOM AND SLUMP

(To the Editor.) Sir, —A good many people think that all that is needed for prosperity is high prices, and therefore, when there has been a boom and a slump is threatening, all that needs doing is to resort to reflation, that is to say, go in for a second inflation on the principle supposedly that the best cure for the effects of having been drunk is to get drunk again and keep drunk while the money lasts. And then? Nobody seems to know or care what is to happen when the reflation has run its course and both money and credit are gone. That is what America is up against today. Five years ago, when Roosevelt took office, he told his people that his policy would be to invoke a controlled reflation in order to raise prices and restore prosperity. At that time America was the world’s most prosperous country. Her balance of payments was always favourable. She was one of the three greatest creditor countries in the world. And what is she now? One of the world’s greatest, if not the greatest, debtor country in the world. In five years her national debt has increased from 19,000 million dollars to 40,000 million dollars, plus a deficit of nearly 4,000 million dollars on this year’s Budget. Moreover, overseas speculators at .the beginning of last year had sent over 8,000 million dollars for the purpose of buying up American securities. How could that be, seeing that reflation always makes things dearer? So it does, but the President devalued the dollar by, it is said; 40 per cent of its former gold price. Therefore all the speculators who had gold had only got to buy devalued dollars at a discount of 40 per cent and rush the dollars over to America and invest their paper dollars in good American securities. How did all this come about? The first thing was to bring the American banks to heel by giving them ten days in which to consider whether they would do what the Government wanted them to do. Twelve thousand banks submitted and about 5,000 banks closed up for .the time being. On April 20, 1933, the gold standard was abolished by decree, and the gold clause in all American contracts was cancelled. The working week was reduced to 35 hours, not by law, but by getting all employers to pledge themselves not to employ any man more than 35 hours a week. That meant that the working men, instead of the Government, had to pay the unemployment tax, by losing nine hours’ work every week. About 400 million dollars were granted to the farmers'for not growing wheat. Not. for clamouring for the inflation or reflation of course. The Chicago Corn Exchange was shut up for not charging high enough prices. That proved too much for the patience of the Judge of All the Earth. That year or the next an awful drought set in that is said to have destroyed about 40,000 farms by making the soil so dry that when the wind came the soil was blown away and the farms rendered useless. That year America had the poorest harvest for about 55 years. No need to complain of bread being too cheap that year. The following year the Government left the farmers alone and there was the best crop for years. The above are a few only of the things that were done in order to reflate prices and bring back prosperity. I may mention that there was a tremendous issue of paper money, which, of course, increased prices, but also added to the costs of production. So that now they are talking of having to give the farmers a subsidy on exported whea* Why? Because, owing. to the fall of the dollar, when the price of wheat in the foreign market is turned into dollars, there is not enough left for the farmer to make a living. Has the high exchange got anything to do with the butter subsidy? But it is not only America; it is'nearly the whole world that is faced with bankruptcy and expropriation as the direct result of reflation. The higher costs of production due to reflation are no doubt one of the main causes of the ever-decreasing food supply of the world. In 1933 there were 31 million metric tons of food left over. In 1936 the surplus only amounted to 13 million metric tons, and it was still decreasing. Reflation, shortage of food, and as if that is not enough, another war! Is that what the diplomats are scheming for?—Yours, etc,

HANS C. THOMSEN. Masterton, August 30.