Wairarapa Times-Age THURSDAY OCTOBER 26, 1939. PAYING WAR COSTS AS WE GO.

Wairarapa Times-Age, 26 October 1939, Page 6

Wairarapa Times-Age THURSDAY OCTOBER 26, 1939. PAYING WAR COSTS AS WE GO.

f TN an address at Auckland, Mr J. A. Lee, who is regarded as * leader of the Left Wing of the Labour Party and has been rmrrv on the war without creating a w.n debt and a advocated strongly the establishment of a State trading^ ban v. w « mentioned proposal nffeds * « £ ? sf aS !»° Si the '"‘"Many people who are far from seeing eye to eye. will. Mr Ttee on General questions of, monetary policy maj be able t nX that it i desirable that the costs of the war should be met to the neatest extent possible without borrowing. >S o far as external expenditure oh the maintenance and equipment of troom overseas is concerned, the policy of pay as you go appeal" to be impracticable. Mr Lee is himself reported to have said that: — it was obvious that if men were sent away or New Zealand maintained 1“ force overseas we activity. Apparently what Mr. Lee advocates is that this country slionld meet its internal war expenditure from revenue. A goo deal may be said in favour of this policy provided it is found io be practicable. ' . > It, should be understood clearly however, Hat the o sound and honest alternative to borrowing is taxation and that if even our internal war costs are to be met. without, borrowing, taxation—assuming that the war lasts for any eonsnlerahl length of time—will have to be so heavy that it will be bound to entail a considerable amount, of that question of determining whether the burden ol ta-atTOi t < - would enable us to pay for the war as we go (so fax as inteina. war expenditure is concerned) is to be preferred to the continuing burden of interest and redemption charges on uai flelt The principal danger to, be guarded against is that the Government may be tempted to meet war costs in part by a third method—that of inflation. The adoption of liat^ lod will be opposed resolutely by all whose eyes are Lilly open to what it involves. Although to a Government called uponi to meet overwhelming financial demands, it may present itsell in an alluring aspect, inflation has been described accurately and iustly as a disguised and extremely inequitable form of taxation. Our Government, for example, might meet quite a substantial part of its war expenditure simply by drawing on Reserve Bank credit. Under the amending legislation of last session it has power to draw on that credit practically without limit. It would be foolish and erroneous, however, to suppose that the creation of unsupported credit in tins way wou c relieve the country as a whole of any fraction of its war oi other burdens. The actual effect of unsupported inflation is to cut down the purchasing power of all the money already in circulation, whether it has been received in the form of wages or in any other form. . . . , Money is of value only as a means of obtaining goods ami services. At. any given time, the money in circulation bears, or should bear, a definite relationship to the available volume of -oods and services. If the amount, of money m circulation is increased on any other basis than that of increased production—for instance in this country by an unsupported expansion of Government credit through the agency of the Reserve bank —the purchasing power of all members of the community is cut down in a degree proportionate to the monetary increase. The amount of money, of purchasing power, is increased, but the amount of goods to he bought is not increased, .1 he creation of unsupported credits will enable the Government, to obtain "mods and services on level terms with holders ol the money that, was already in circulation. When this happens, however, it follows that everyone else must go short. Ihe purchasing power of their money is cut down automatically Meeting the greatest possible proportion of the costs of the war directly, from taxation, rather than by borrowing is a policy that has every claim to serious attention in. this country and in other countries. There is no easy third course, howevei. Whether it is called using the public, credit or anything else, inflation can lead to nothing else than grossly inequitable taxation—none the less inequitable for being partly concealed anc ] to present and future economic disorganisation.

A NAZI CARICATURIST.

A TTEMPTTNG to pillory Britain as having been engaged lor years in sinister and’secret preparations for the present European war, Herr von Ribbentrop obviously was addressing only those people, chiefly in his own country, whom he supposes to be blindly ignorant of the true course of world events. Not. only in the'countries of the British Empire, but in France, the United States and many other countries his oration at Danzig will awaken a feeling of contempt modified only by amusement. The German Foreign Minister is, of course, perfectly well aware that Britain and France were as completely united in their desire to preserve the peace of Europe as they are now in their resolve to bring about the overthrow of the gangster tyranny which made and makes peace impossible. The speech is summed up fairly as 'one which introduces no new element into the situation and is intended obviously for internal consumption in Danzig and in Germany. It may be hoped, however, that even in Danzig and in Germany there is a growing appreciation of the fact that the only real enemies of the Reich and its people are the members of its discredited dictatorship. In contrast to Herr von Ribbentrop’s fantastic falsehoods, the merciless conscription and enslavement of the German people in furtherance oi the schemes of a war-mad dictatorship are a stark reality. Just how much the Nazis care for the German people surely is demonstrated in the ruthless uprooting of long-established population in the Baltic States and elsewhere. The vileness of the Nazi tyranny has long been apparent. Now that its crass incompetence is being made equally manifest, particularly in the disastrous and "humiliating extent to which Germany is being made the catspaw of Russia, the point surely is being approached al which the people of the Reich will deal in exemplary fashion with the gang that has brought them to such desperate straits.