8.—3.

production of primary products is not a circumstance to tie frightening increase that lias taken place in manufactured goods. The mass production factories of the United States can supply all the needs of the world ? —They can supply, but they are not doing so at the moment. They are only working two days a week ?—Yes. The capacity is there, but the whole thing has got many sides to it, and it seems to me fundamentally that, all said and done, we all live by taking in one another's washing, but it is a question of organization and balance in the factors. Has that not always been the case ? —Yes. But we have never had the whole system disorganized or broken down to the extent it is now. What has happened ? Is it sunspots as somebody suggested ? There must be some explanation ? — As to the cause of the depression, innumerable causes have been put forward. Scores and scores of factors come into the picture. They react on one another, but it seems to me that that is the basic factor, because theoretically, as we all know, trade both external and internal is only, after all, an exchange of goods and services. If we had a self-contained community, small or large, in which all the required goods were being produced in their right balance —that is to say, that if you had one man producing sufficient bread for the whole community and another man sufficient meat and so on, theoretically every man would be fully employed and there would be no surplus and no unemployment. If that were done, with the latest applications of the discoveries pf science and the harnessing of power, there would not be a job for the great majority of people ?—lf you had perfect co-ordination and balance you could have either one of two things, either a higher standard of living or much more leisure. I agree. Human requirements are dynamic. They are not static. Production is terrifically dynamic. In fact, it looks as though the powers of production have become much greater than our powers of absorption ? —I do not think that is correct. The thing still falls back on the question of preserving the balance in the different productive capacities. As long as you could keep perfect balance in your productive side of the picture, which involves many things, including tariffs and quotas and all that type of thing and not only the potential capacity of factories in different countries—if you could keep all that, the consumption would flow evenly and automatically. The net result is that we are having leisure forced on us ?—Yes. A section of the community is. We call it unemployment. Leisure, you would agree with me, is the greatest boon humanity can crave for ?—Yes. So that there is no unemployment problem and it is wrong to call it a problem if that is the case ?— I do not agree with that, but it would be true if the leisure were properly distributed. Mr. Langstone.] Leisure with income ?—That is so. Captain Rushworth.] If we regard unemployment as a problem, within the framework of the existing monetary system, there is only one solution, and that is to take our scientists and engineers and put them in prison. Is that right ? —No. I suggest that we should not regard it from that angle at all. At the bottom of page 9 you draw attention to the deposits in 1924. How do the deposits at that date compare with the deposits at the present time ? —You mean total deposits ? Yes ? —lt is illustrated on the graph. You will say that they are somewhere about £56,000,000 or £57,000,000, and now of course they have risen to somewhere about £64,000,000. That includes the notes as well. You have got total deposits and free deposits, but you have not got fixed deposits ? —lt is the difference between the two. The top line shows the total deposits and notes, and the other the free deposits and notes. The difference between the two is the volume of fixed deposits. The paragraph that begins " Furthermore " half-way down page 10 : " The analysis of these figures disproves, or at any rate discounts, the popular idea that there are ample goods in the Dominion to meet requirements and all that is lacking is the money with which to acquire them." That leaves out the potential production does it not ? —That is not only a statement of fact. It implies this, that if there were only sufficient goods to meet current needs of the community in 1928, and that supply is now reduced by 25 per cent., then there is an actual shortage on the goods side —that is, goods actually produced. lam not referring there to potential capacity. But we have 70,000-odd registered unemployed, including men of almost every trade and profession ? —But that is covered here in the same paragraph, where reference is made to the fact that for various reasons our productive capacity has not been fully utilized. That mitigates the effect of the previous sentence, but the trouble is that people reading this hurriedly may only get the one side of it without the qualification. I draw attention to it because that will correct it perhaps. Then the last sentence in the same paragraph : " But whatever action is necessary to do this lies outside the monetary system, for the additional production will automatically draw forth the additional purchasing-power required to buy those goods." Is that true ? —Broadly, I think it is. Can it possibly operate that way ? —Yes. Here is a point that may be new : It is suggested that no industry distributes as much in purchasingpower as is included in the cost of the goods that it produces ?—I think that is a fallacy. May I give you an illustration to indicate what I have in mind. Before constructing any capital works we must of necessity first save up food, clothing, and shelter and suchlike things for the men engaged on that work. In order to distribute that food, clothing, and shelter we have to use money. We borrow money for the purpose. We distribute the money as wages. The wages are used to purchase the food, clothing, and shelter that we have saved up, and the money is paid back to the issuing authority, and at the end the whole thing is complete. The factory or other capital works are completed, the goods that have been saved up have been consumed, and the factory is free of debt. Now, we start the illustration, and to make it as simple as possible 1 assume that we get our raw materials

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