OTHER PEOPLE’S IDEAS

Wairarapa Times-Age, 28 September 1943, Page 4

OTHER PEOPLE’S IDEAS

MONETARY POLICY (To the Editor) Sir,—With your kind permission I shall deal as briefly as possible with the main points raised by Mr Crawford. Democratic Labour candidate, in his reply to my letter of September 13. He states in effect, that debt-free currency can with advantage to the great majority be issued “to the extent of unutilised productive capacity." This looks very attractive; but my contention was. and is, that any State discrimination or interference with private investors is both unjust and unnecessary. And a policy which is unjust to some, and unnecessary in any case, is a bad policy. The policy is unjust to the private investor because when his contract expires his money will have no value. It is no answer to say a reduction in taxation would offset the loss, for such reduction would affect all incomes; and what would be a distinct gain to most would be poor compensation to many . There would be a certain amount of grim humour in the prospect of a person whose sole income had suddenly disappeared exclaiming: -Well, thank heaven, my rates and taxes are down a bit, anyhow!”

I agree that national and local services should be financed by national credit at low interest; but to argue that this would mean a lessened demand for private money at ruling rates is fallacious. There is a growing realisation about the true nature and origin of the great bulk of national and local body indebtedness. That origin does not lie in the field of private investment. It lies mainly in the power vested in the great financial institutions, of creating debt-money (not currency, simply figures operated on by cheque) practically ad lib, the only restriction in New Zealand being that the tradingbanks are required by law to deposit an amount equal to 7 per cent of "demand’’ liabilities—advances—with the Reserve Bank. The relatively small amount of Government and local body indebtedness to private persons, businesses, etc., who hold Liberty Bonds. Government Stock, etc., could be repaid by an issue of national credit without repercussions because, first, much of that money would be spent at once; secondly, with expanding industry and free enterprise of all kinds resulting from a policy indicated in my concluding paragraph, there would be an ever-increasing demand for money i’roin private investors. There is no doubt, therefore, that a change-over to debt-free financing of national and local services need not affect the private investor.

In regard to the effect on land values, to say that no Government would stand by and watch its legislation nullified does not justify the legislation. In justice, either the land prices must rise or the seller must be subsidised. Limiting the allowable mortgage to the productive value of the land at present ruling rates of interest would not meet the position, because the -mortgagee would be in a position analogous to that of the private investor referred to above.

Now, Sir, in support of my contention that debt-free money for private industry is unnecessary, I hazard the opinion that any farmer, business man, manufacturer or retailer will agree that interest is only a minor item in the rising tide of cosls, 'through the Rehabilitation Act (1930) many rates were reduced; they are certainly not rising. What the vast majority of producers require is a decent return, over and above costs. Give him that and he has no legitimate quarrel with the 5 per cent. Give him that (and the method is quite simple), and the producer will make good; the wheels of industry will turn until the “unutilised productive capacity” is fully employed; the consuming public will be able to buy all the goods produced; earners on fixed incomes will benefit, and no private investor will be penalised.—l am, etc., MAURICE M. WHIMP. Greytown, September 24.