OTHER PEOPLE’S IDEAS

Wairarapa Times-Age, 30 August 1939, Page 2

OTHER PEOPLE’S IDEAS

THE EzXPANSION OF DEBT (To the Editor.) Sir. —When the member for Grey Lynn told the House that if we were to prove unable to meet our obligations, we would have to repudiate our liabilities, it raised a storm of disapproval, but when he said our present public and municipal debts amount to over £4OO million nobody appeared to have noticed it. If that is true, and it is unfortunately only too true, then we must have trebled our public debt from £99 million in 1914 to its present amount. The war years account for a little over £lOO million, and the high exchange for another £7B millions, made up as follows: —Increase of our debts in London, £4O million. Indemnity to the banks, £2O million. Annual cost of the high exchange to the Consolidated Fund, £ll- million a year for 4 years—£6 millions. Interest on £660 million for 4 years, £l2 millions; total, £7B millions. So we see the war and the high exchange between them account for nearly the whole of this enormously rapid increase in our indebtedness. We may have a war any day, and as for high exchange, it is there, doing its fell work every day we

live. Nature’s remedy is what we call a slump, technically • called deflation. Man’s way is what has come to be known as reflation. The Americans were some of the first to try that. Instead of reducing the debt on the land, they reduced the gold in the dollar, in terms of which the debts were to be paid, by about 40 per cent. A decree was issued cancelling the gold clause in all American contracts and making paper dollars, worth only 60 per cent of their face value, legal tender at their face value. That meant the creditors got value for about 40 per cent less than what was owing to them. And to make quite sure that there would be plenty of paper money to pay with, some 2,000 millions of paper dollars were printed and distributed among the banks for circulation. Was not that a far easier way of getting rid of the debt on the land, than by the old-fashioned orthodox way, first introduced by Moses, of cancelling all debts on farm-lands, but not on townlands, every 50 years? To raise the price of farm-produce the corn exchange in Chicago was closed down, because it was selling wheat too cheaply, and a subsidy of 400 million dollars was voted to the farmers to compensate them for not ploughing some of their land. The above is briefly what has been called the New Deal, or the Recovery Act. And the result? In 1935 some 20 million people were out on relief. Last year 1735 million dollars were said to have been voted for relief and unemployment. In 1932 the American public debt was stated to be about 19,000 million dollars. Last year it was 40,000 million dollars and getting bigger than ever before. The Americans who had lent money abroad lost 40 per cent of what was owing to them, and to finish up foreign investors took advantage of the devaluation of the dollar to buy paper dollars at a discount of 40 per cent and rush them over to the States to buy American properties and securities. Up till the end of 1936, some 8,000 million dollars had been sent over and money was then coming over at the rate of 3i million dollars a day. It is still going on, for if the Americans slop buying gold the dollar will go to smash like the German mark went. When, there is nothing more worth buying, then, perforce the thing will stop. And then America —at least the States —will have new owners, who will probably conduct the affairs of the country in a different fashion. Ought we to shut our eyes to the plain logic of the above? Can we do, as we have been doing —follow the example of the States and expect any other result than the fate that is overtaking America? At present a good third of the money we get for our produce in London has got to go to pay interest on debts owing publicly and privately in London. The debt is growing every year. The remnant, left for buying goods is getting less every year. Only one thing can save us. Deflate the debts on the land so as to reduce the cost of production. Stop all imports of goods that can be manufactured here, and restore the value of our currency to the 1914 value by making it convertible. Failing to do that, and doing it soon too, before it is too late, what is there for it but to have the fate that is overtaking not only America, but apparently the whole world, overtake us? —Yours, etc., HANS C. THOMSEN. Masterton, August 26.