A.N. FIELD
The Truth About the Slump
Our review of the causes of the slump in commodity prices is now ended. In the foregoing pages the reader has been given the facts so far as the author is able to discern them. From many sources matter has been brought together giving a composite picture of the course of events. It is now desirable that we should glance back over the path we have come.
We have seen how by enacting that debts can only be legally discharged by the handing over of gold, the leading nations of the world have suffered from periodic strangulations of their trade in consequence of a scarcity of the means of payment. Control of gold, under the gold standard, thus gives control over all other commodities.
We have seen that foremost economists, bankers, and commissions of enquiry, after careful examination of the facts have reached the conclusion that the present world-wide depression, and most of the great commercial crises since the beginning of the nineteenth century, have had their root in variations in the purchasing power of gold.
We have seen how in consequence of the huge accumulation of gold in the United States the policy pursued by the United States Federal Reserve Board now determines the general price level for commodities.
We have seen how, according to independent state-ments made by a number of responsible persons, the Federal Reserve Board deliberately created the post-war price inflation and boom, and deliberately created the ensuing deflation and slump. Nor is there any secret that the Federal Reserve created the conditions leading to the speculation of 1927 on the New York Stock Exchange which speculation it next suppressed by ushering in dear money and the present slump.
We have seen how the Federal Reserve Board was created as the result of years of agitation by a German but newly naturalised as an American citizen.
We have seen that this man is the brother of the head of a great German banking-house, and who has been described as virtually the financial dictator of Germany.
We have seen how this man, who created the Federal Reserve system, said to be predominant in American finance today, has worked strenuously against Britain in the war, and after its close expressed the opinion that whatever other nation might be let off lightly Britain must pay up.
We have seen how the war loan conditions were negotiated which delivered the British people bound hand and foot into the power of these controllers of American finance.
We have seen that the late British Ambassador to Russia records how during the war a German financier was corrupting a Russian Minister, and we have seen how in his memoirs the late editor of the London Times states that the creator of the Federal Reserve Board and his now-deceased brother-in-law and business partner were "akin to, if not identical with" the men who put the Bolsheviks into Russia, and we have seen how the Bolshevik revolution was led and by whom it was financed.
We have seen how a partner in this banking house of Hamburg has played an important part in the founding of the Bank of International Settlements which is designed for gold control of the world, and we have noted that this same financier is now chairman of the Financial Committee of the League of Nations.
We have seen how Britain was after the war forced back on to the gold standard as the result of pressure from the United States, and we have the opinions of high authorities that the policy of deflation consequent on this step has been mainly responsible for the terrible depression and unemployment from which Britain has ever since suffered.
We have seen how on Australia finding itself in difficulties consequent on this juggling with the value of money, the Bank of England sent as its emissaries to the Commonwealth gentlemen named Sir Otto Ernst Niemeyer and Professor Theodor Emanuel Gugenheim Gregory.
We have seen how the money taken from the American people during the recent stock exchange boom was used largely to finance German industry.
We have seen how a recent well-informed writer declares that war between Britain and America is more probable than war between America and any other power, and how concerns developing situations described by him as having potentialities of war are either German Jew controlled or have strong German-Jewish associations.
We have seen how subterfuge and deceit were used to secure the passage of laws making gold the only legal tender for the payment of debts.
We have seen how the Federal Reserve System was put forward as a scheme to prevent financial stringencies, and how the instruction that the board use its powers to this end was struck out surreptitiously from the measure during its passage, and how determinedly the officials and members of the board have since resisted the placing in the law of any such instruction.
We have seen how Mr. Henry Ford conducted a campaign against Jewish influence in various directions deemed by him to be harmful, and how in 1927 as part of the terms of settlement of a libel action he made a retraction and abject apology. And we have further seen how his son, Mr. Edsel Ford, is now a partner and co-director with the creator of the Federal Reserve Board whose doings had formed a prominent part of Mr. Ford’s exposure.
Finally, we have seen how in documents published in Russia in 1905, and summarised in the London Times in 1920, there was set out an alleged programme for world domination and the ruin and destruction of the Christian religion and the Christian national states. And we have seen how the course of events in the twenty-five years since that programme was published has provided a fulfilment of a great part of it.
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Are these things real, or are they a mere figment of the imagination, an unbalanced and hysterical placing together of facts that have no relation, a fantastic tracing of connections where there is no connection ?
The answer is that the evidence is there and the reader must form his own conclusions on it. No one else can do that for him.
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If we accept it as a fact that the present gold control of commerce and industry today is in the hands of men hostile, or at any rate wholly unsympathetic, to the British people and British institutions, what is there that we can do about it ?
The first necessity is that there should bite and burn into our consciousness the words of the late Lord Bryce printed at the forefront of this book—words so vital that no excuse is needed for here repeating them :
"Democracy has no more insidious or persistent foe than the money power, to which it may say, as Dante said when he reached on his journey through Hell the dwelling of the God of Riches, ‘Here we found Wealth, the great enemy.’ That enemy is formidable because he works secretly, by persuasion or deceit, rather than by force, and so takes men unawares. He is a danger to good government everywhere.
"The truth seems to be that democracy has only one marked advantage over other governments in defending itself against the submarine warfare which wealth can wage, viz., Publicity and the force of Public Opinion. So lung as Ministers can be interrogated in an Assembly, so lung as the press is free to call attention to alleged scandals and require explanations from persons suspected of an improper use of money or an improper submission to its influences, so long will the people be at least warned of the dangers that threaten them. If they refuse to take the warning they are already untrue to the duties freedom prescribes."
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Under modern conditions it is impossible to conduct a great newspaper without capital, and a considerable amount of capital. Like the rest of us most newspapers are in greater or less degree already in the toils of the money power. Even though entirely independent in their ownership, and free of external financial obligations—which few of them are—they are all dependent on advertising revenue, and any person of ordinary intelligence on studying a daily paper or magazine can perceive the great volume of advertising that is closely linked with high finance. To nothing have the financiers devoted more attention in America and Europe than to control of the press. Here again we have the opinion of that much-travelled and shrewd observer, Lord Bryce, as given in 1921:
"In every country unscrupulous wealth can by artificially ‘making opinion’ mislead and beguile the people more easily and with less chance of detection than in any other way."
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If the money power has a strangle-hold on the world today it is because the determination and persistence of the financiers who dominate it has been superior to the moral fibre of the world’s nations and their leaders. The people have been misled, and their leaders have been either likewise misled or corrupted.
By guile and deceit, and based on human greed, sloth and stupidity, has the great and far-flung structure of the money power been built until today it controls the whole world.
From the standpoint of Christian morality, from the standpoint of morality embodied in any of the great religions, or in any recognised system of ethics, the power that today bestrides the world is wholly evil. Our conflict with that power is essentially a moral conflict. "The serpent beguiled me, and I did eat," said the mother of mankind on an historic occasion, and that is about all we can say of the mess we are in today.
What other result than that which has accrued could we expect after instructing our youth for the best part of a century in a system of vicious rubbish dubbed political economy in which greed is erected as the governing principle of conduct, in which human labour is treated as a commodity to be bought by capitalists in the cheapest market, and human beings themselves regarded as very little more than wealth-producing machines and chattels ? "Moral considerations have nothing to do with political economy," said John Stuart Mill, one of its founders, and no one ever spoke a truer word of this monstrous "science," nor is it possible to have a more complete condemnation of it than is contained in this statement.
What other result than that which has accrued could we possibly expect from the enactment of laws decreeing that the sole legal means of discharging a debt is by the debtor presenting to the creditor a useless metal which he can neither eat, drink, nor wear (except for ostenta-tion), and of which the total quantity in existence is so utterly insufficient for the purpose decreed that the whole crazy system collapses in a heap every time anything serious happens ?
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If astute financiers are leading us into a slavery of gigantic unpayable debt we are merely reaping the fruits of what we have sown. Usury, condemned by the religion we profess, condemned by all the ancient peoples of the world, we have made the very basis of our civilisation. By enacting laws making gold the sole legal tender we have created an artificial scarcity of the means of payment, and have thus made enslavement in usury the universal lot of mankind. Debt, which like poverty, should be the complaint of occasional victims of misfortune, is now the normal life-long state of all. The usurers today sit at the forefront of the banquet of life and rule our world. Aristotle, living two thousand years ago, very properly ranked them with the keepers of houses of ill-fame. Cato, asked what he thought of usury, replied by asking his questioner what he thought of murder. "Nothing is baser, nothing more cruel, than the usury of this world," said Chrysostom. St. Basil called it "the last pitch of inhumanity," and of the borrower’s fate this Christian bishop of sixteen hundred years ago wrote:
"At first a man is bright and joyous; he shines with another’s splendour. ... But the money slips away. Time as it runs on adds the interest to its tale. Now night brings him no rest; no day is joyous; no sun is bright; he is weary of life; he hates the days that are hurrying on to the appointed period; he is afraid of the months for they are the parent of interest. ... Usury is the origin of lying, the beginning of ingratitude, unfairness, perjury."
Forty years ago during a famous trial in France an eminent advocate, M. St. Audan, spoke as follows in defence of Jean Grave, charged with libel:
"St. Gregory of Nyssa, the immortal thinker of the fourth century, wrote these lines:
"‘He who would give the name of robbery or parricide to the iniquitous invention of interest would not be very far from the truth. What, indeed, does it signify if you have made yourselves masters of the wealth of another by scaling walls or by killing passers-by, or if you have acquired what belongs to you by the merciless method of the loan ?’
"If anyone had prophesied to St. Gregory as follows:
" ‘A day will come when that thou treatest as robbery and assassination will become the law of the world, and when an Attorney-General will indict in an assize court writers who share thy opinion. The whole of society will he founded on usury. They will build a temple which they will call a Stock Exchange. This temple will fill the place of thy cathedrals, even as thy cathedrals have filled the place of the temple of Venus or Jupiter. The priests serving in this new temple will he called bankers, stockbrokers and financiers. ‘They will swindle others out of the gold that will ensure to them omnipotence. They will buy everything that is buyable, and some of the things that are not. And vain revolts against their frightful empire will serve only to make more manifest its terrible solidity.’
"If anyone had prophesied that to St. Gregory, St. Gregory, who believed in God, would have joined his hands and cried: ‘Lord, deliver us from such a moral malady!’
"The malady has run its course."
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It should be remembered that strongly as the Old Testament condemns usury. it is yet laid down that a Jew may lend to a Gentile on usury. "Unto a stranger thou mayest lend upon usury," says the twentieth verse of the twenty-third chapter of the Book of Deuteronomy. Upon thus doing unto others as they would not be done by have a section of the Jews of Germany built up their present enormous financial power.
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Practically all material wealth is perishable. If a man has more wealth than he can use it will go bad on his hands. Unless he is going to lose it altogether he MUST lend it: he must find someone who will undertake for the advantage of present use to replace it with a similar amount at a later date. If we had a sensible monetary system, by which wealth could be readily monetised, the lender would probably be found willing to pay a small fee for having this service rendered him, just as the banks today charge us a small fee for storing the 25 million pounds or so of our ready money they hold on current account.
The practice of usury must be judged by its fruits when all is said and done. Has it made the world a better place ? In New Zealand we have borrowed a lot of money. We have been borrowing for sixty years now. Public works have been built all over the country, but much of the money come by in this easy way has been squandered: if the undertaking costs double what was estimated, why worry ! It is always easy to go back to the pawnshop and borrow more. Today we are paying more in interest on our public debt than we borrow, and if we had no debt we could spend about a million more on public works each year than we are doing by going on plunging headlong in the morass of indebtedness.
Moreover, we do not in the least know where we are with that burden of debt interest. Some years ago we embarked on a policy of hydro-electric development.
This scheme means that instead of paying wages to New Zealand miners to produce coal to generate power and light we pay interest to financiers in London. Today that interest bill represents about double the number of bales of wool, double the quantity of meat, cheese and butter that it did when we borrowed the money. In future years what will it represent ? None of us knows. Anything the money jugglers like to make it represent. If we had built those works out of revenue the probability is that we should have taken care to get a lot better value for the money, and even if the works had cost too much the matter would have been done with. As it is, we will probably pay several times over in interest what the work cost and still be owing the cost.
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"Startling as it may appear," wrote Mr. Arthur Kitson in The Money Question, "it is nevertheless an easily demonstrated fact that, under the current rates of interest, the debtor classes of nearly all civilised nations are rushing into bankruptcy. The fact is that the wealth production of nations cannot keep pace for long with their interest charges. In fact, interest as a universal working principle is—at all ordinary rates—an impossibility. Five per cent. interest means a doubling of wealth every twenty years. At compound interest it is doubled in about 14¼ years. ...
"Usury is always increasing more rapidly than wealth. It knows no period of depression, no time of stagnation, no failure of crops, no unfortunate specula tions, no condition of ill-health and inability to produce. It takes no holiday, and refuses even to keep the Sabbath. It forever goes on as regular as time, and as relentlessly as gravitation, counting and adding to men’s burdens, piling them higher and higher, until the loan becomes too great, and there is a financial crash. No system of production has yet been discovered capable of maintaining this regular, never-failing supply which usury demands.
"All forms of wealth production are fitful, irregular, and subject to fluctuations. One season’s harvests are abundant and the next a failure. This year’s fruit crop may prove enormous, and the next spring’s frosts may kill all the blossoms. The consequence is that though for a limited period production may make rapid progress, yet, like the hare and the tortoise, usury invariably overtakes and keeps ahead of production. ...
"Every certain period there is a universal breakdown; panics and bankruptcy become world-wide; interest bearing wealth is swept away, and equilibrium is restored only after interest-bearing capital has been greatly reduced. ... Startling as it may seem, it is an indisputable fact that panics, bankruptcies and failures are absolutely necessary in order to keep the system alive. ... Usury, like gravitation, causes large bodies to attract and eventually absorb smaller ones. The small capital of individuals is being constantly absorbed by the greater capital of corporations. This is its inevitable tendency. The forces of attraction and absorption are as strong, constant and relentless in the monetary as in the physical world.
"‘Usury,’ says Lord Bacon, ‘bringeth the treasure of a realm into a few hands’."
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We have seen how Mr. Ford relates in his autobiography that bankers came to him in the post-war slump—a banker-created slump—and offered him a loan to help him through on condition that they were given charge of the financial end of his business. Mr. Ford was able to escape their clutches. In how many other cases, one wonders, were similar offers made, and how many producers were as lucky as Mr. Ford was on that occasion ? That is a very real instance of how the tentacles of the money octopus reach out in a period of depression.
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What is the moral of this for us ? In New Zealand we have taken to borrowing as a drug fiend takes to dope. Is there any limit to the mountain of debt which we individually, and our public men for us collectively, are willing to pile on our backs ?
Interest charges are the real burden that is crushing down on us today. Yet this plain obvious fact is the last thing that we are willing to face. And when men get up and seriously suggest that the way to alleviate our misfortunes is to borrow more money no question is ever raised as to their sanity.
Even with money maintained at a stable level and controlled by financiers amiably disposed towards us, our ever-widening bog of debt would be a menace. With money controlled by interests inimical to us and subject to violent artificially-induced variations in value we ate almost wholly in the hands of our enemies, and our utmost endeavour should be to avoid further debts and to reduce as far as we are able, and as rapidly as we are able, the mountain of indebtedness already on our backs.
The forces opposed to us are capable of action on a scale which, judged by our standards, is colossal. Many may suppose that in face of them our only course is to drift with the stream regardless of whether that stream leads to destruction or not. That is a counsel of despair. It is not given to mortals to command success, only to strive and fight on, to learn the lesson of past mistakes, and to make their failures the stepping stones to better things. A man who lives by running to the pawnshop until he has nothing left to pawn ends his career only in one place, and that is the gutter. The fate of a community which follows the same course must in the end be the same.
If there is a conspiracy against civilisation, it is a conspiracy of long standing, and those who direct it are content to achieve their objective step by step. If in danger of discovery they have only to ease monetary conditions for the time being to lull suspicion to sleep. In the end—be it soon or late—they will strike. The enslavement of Russia was not accomplished in a day.
In face of the economic crisis confronting us what steps are we taking or proposing to take to mitigate its effects ? We read a lot in the papers about the need for "reducing the costs of production." To a large extent this phrase seems to be another name for reducing wages. So far as the farming community is concerned wages are a minor item in the annual expenditure. In an open letter addressed by the President of the Farmers’ Union, Mr. W.J. Polson, to the Acting Prime Minister in November last, figures were quoted showing the annual expenditure on a 1,000-acre sheep farm and on a 120-acre dairy farm. In the former case wages accounted for £250 out of a total of £2,650; in the latter for £312 out of £1,395. The sheep farmer was shown as paying £1,290 in interest and the dairy farmer as paying £393, and this after the capital value of the dairy farm had been written down by half. In both cases the interest bill is decidedly the heaviest single item of expenditure. The committee of enquiry into dairy farming conditions recently set up by the Government has reported to similar effect.
There is not the least doubt that any attempt to mitigate the evils of the slump which ignores the interest burden is doomed to failure. Our trouble is that not onlyhave we suffered a very serious reduction in the total of our national income, but that the proportions in which the income is distributed are all out of adjustment.
A maxim for the distribution of farming income that one sometimes hears quoted is: one-third for the rent (in New Zealand, mortgage interest); one-third for the farmer; and one-third back into the farm. In Chapter I we considered the position of a farmer who had bought a farm in 1925 at a figure which worked out satisfactorily on the above basis.
At the produce price level at which he bought the farm, the farmer out of every £100 of income, on his plan of expenditure had £33 for the rent and £67 for himself and to put back into the farm. With a fifty per cent. decline in the prices for his produce, instead of £100 coming in there would be only £50. Out of that £50 the same 133 would have to be found for the rent (mortgage interest), leaving only £17 for expenditures for which £67 had previously been available.
The price slump would be bad enough for that farmer even though all charges were reduced in proportion to the reduction in total income. With interest charges standing at their old level it is, of course, simply murder.
There is a perfectly practicable way in which this mal-distribution of our available income can be corrected. All that is needed is for the Government to decree that henceforth the gold content of the New Zealand pound shall vary according to the movements of the export produce price index compiled by the Government Statistician, taking, say, the 1925 index figure as par. The effect would be that the number of notes issuable against a given quantity of gold would vary as the price index moved up or down.
An enactment on these lines would mean that our pound would fluctuate against the British pound, but it would be a pound purchasing always the same amount of New Zealand produce.
We would make up a basketful of wool, meat, butter, cheese, etc., each in the proportion in which it figures in our production, and the whole basketful representing exactly what a British pound (113 grains of standard gold) would buy at the 1925 average price level, or whatever point we selected for stabilisation. Thereafter a pound would be our name for the amount of gold necessary from time to time to buy that basketful of commodities. In other words our pound would be constant in buying power and variable in gold. Today it is constant in gold but variable in buying power.
The practical effect of this would be if, for example, we had fixed our par point with the British pound at the 1925 level, and the general level of our produce prices fell 50 per cent. below the 1925 level, that our pound would be worth only 50 per cent. of an English pound.
We have seen the unhappy position of the farmer in our illustration above, who is faced with a 50 per cent. decline in his income as compared with 1925. How would he fare under the scheme sketched out above ? He would receive for his produce sold in London £50 in English pounds for every £100 he had received in 1925; but on exchanging that money into New Zealand pounds he would be given £100.
The farmer would thus have the available money to cover his interest charges, to put back into his farm, and to maintain himself and his family. He would have £33 in interest charges to meet out of every £100, and he would have the f100 out of which to meet it.
This would be the case with wage earners and most people right through the community. With export production at the same volume as in 1925 the quantity of money in the country would be the same as 1925. If production increased in volume the money would increase. If production declined in volume the money would decline in amount.
What we would really be doing by this plan would be rationing the gold money we got for our products in London. If the gold money due to us came to half of what it formerly was in consequence of a decline in prices, as we have supposed and as is pretty near the case, everybody’s share of that gold would be automatically cut down to half.
All the time the gold content of our pound would keep on varying according to the amount of gold it took to buy our standard pound’s worth basketful of export commodities.
These alterations would probably be made every two months or so by a board set up for the purpose, and the way it was to be done would, of course, be very precisely laid down by law.
The alteration at any one time would thus be very slight, and the whole scheme once established would work as simply and unobtrusively as putting on the clock for summer-time works.
So far we have looked at the scheme as it affects the exporter in a time of falling prices. It is time we thought about the importer.
With a produce price decline of 50 per cent. below the par point the importer buying goods in England for £100 in British pounds would have to find £200 in New Zealand pounds to pay for them.
At first glance this will seem disastrous for the importer. In reality it would not be. He would only be hit to the extent that the export produce index on which our pound was based, fell below the general price level of the goods he imported.
If the prices of imported goods had fallen at the same rate as the gold content of our New Zealand pound had varied the importer would be in exactly the same position as in 1925. His prices would remain round about the 1925 level, his customers would be just as able to pay those prices as in 1925, and the importer’s ratio of profit would be the same.
The importer, as a matter of fact, would be very much better off than he is today, for instead of a wholly disproportionate amount of the national income going to the moneylenders, as is now the case with our shrunken national income, the amount of free spendable income in the hands of his customers, the public at large, would be much increased.
What is killing trade is clearly seen if we look at the case of the farmer who in 1925 out of every £100 of income had £33 tied up in interest charges and £67 spendable. With only £50 coming where there was £100, and with £33 still going out for interest it means that the spendable balance is down to £17—a decline of 75 per cent. in the farmer’s spendable money, whereas the farmer’s total income fell only 50 per cent.
The above figures show pretty clearly that from the importer’s point of view things are half as bad again as they would be under the plan suggested.
It may be said that the excessive share of the national income now drawn by the moneylenders is still in the country. But a great part of this interest payment goes to wealthy people, and an increased expenditure by a few people on luxury articles is no compensation for the loss of the widely distributed spending power of the people as a whole.
If the fall in import prices was less than the fall in export prices on which we based the gold content of our pound, the importer would, naturally, suffer to that extent. But that would be a condition in which it was essential as a matter of public policy to restrict imports to balance our national overseas trading account.
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This plan would have a number of other advantages at the present time. Some of these advantages are as follows:
It would make New Zealand an attractive place of residence to persons with fixed incomes. Civil servants in India, etc., and other such persons would probably be much attracted by the idea of residence in New Zealand on retiring on pension if they could exchange an annual pension of, say, £400 British pounds for £800 New Zealand pounds. It would be all to our advantage to have such people here eating our produce on the spot.
The favourable exchange would also have its effect in attracting tourists.
Another effect would be to give a great stimulus to gold mining, and as gold is the one commodity which our overseas creditors will accept in fixed and unchanging quantity in discharge of our debts, the more we can produce of it the better.
The more stabilised internal price level would also be a great assistance to manufacturers and give a valuable stimulus to our secondary industries. And here it may be emphasised that the bigger a town population we have the more prosperous will our farmers be.
This latter statement is not in line with the thought of many who treat the growth of the towns as a matter for concern. Our farmers would have to live in a very barbaric state if there were no town populations to purchase their products. Not having a town population of our own to do this we have to seek out town populations on the other side of the world in order to dispose of our produce, and have to go to great expense to transport it. It would be much more to our advantage to cut out those charges and have our consumers on the spot. Also, we have spent a great lot of money on developmental public works without having got the development. We need more population to right this, and bring per capita overhead charges for our national undertakings down to a more reasonable figure. The plan outlined above makes it easier for people to come here, not, of course, that the writer suggests that we should start bringing people into this country while we have the ridiculous spectacle of men wandering about New Zealand looking for work in a country where so much requires to be done. That is the first mess we have to set ourselves to right. And the way to right it is to set to in earnest on our money muddle.
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The plan outlined above is not a fancy creation of the author’s. It is known as the Irving Fisher Compensated Dollar Plan. This plan was put forward as far back as 1911 by Professor Fisher, formerly Professor of Economics at Yale University in the United States, and has been under criticism ever since. Its technical details will be found fully set out in the 300 pages of Professor Fisher’s book, Stabilising the Dollar, published in 1920. More briefly it is discussed in Professor Fisher’s later book, The Money Illusion, published in 1928.
The Fisher plan was considered by New Zealand’s now defunct Board of Trade in its annual report for 1919, when it was seeking a remedy for the great fluctuation in the value of money brought about after the war. After a lengthy review of the Fisher plan the Board said:
"So hopeful does Professor Fisher’s suggested remedy appear to the Board that we earnestly recommend it to the serious attention of the Government."
So far from getting the serious attention of the Government the Fisher plan seems never to have received any attention at all.
Sir Josiah Stamp, one of Britain’s foremost economists and a director of the Bank of England, has expressed the opinion that Professor Fisher represents the "best informed opinion" on the subject of money.
In an article published in the United States Banker for January, 1929, Professor Robert H. Tucker of Washington and Lee University, wrote of "Our Unstable Standard of Value." Declaring the Fisher scheme of money stabilisation to be the most complete and thoroughgoing of any put forward, Professor Tucker said:
"It is not a panacea, or a substitute for economy or for efficient management. It is not a guarantee of a perfect system of distribution. But, as has been pointed out, it would reveal the facts, instead of obscuring them, as the present unstable dollar (pound) obscures them, and directly or indirectly accomplish more than any other reform proposed in the world today."
Sir Josiah Stamp’s opinion is very similar as to the, urgency of action: "Everything," he says, "depends on whether our combined and international wisdom can master the next stage of monetary science. Certainly the old ideas and practices will no longer serve. I have long said that a new development in monetary knowledge is the most important single problem of our age—more important than unemployment, industrial peace, or capitalism, because fundamental to them all."
After twenty years of criticism the Fisher plan—it is really much older than Professor Fisher, for you will find the rudiments of it in Professor Jevon’s book on Money published in 1870—and in many other works of foremost writers—this plan still commands the attention of all writers on monetary policy. Everything has been done with it except try it.
People may say, "Oh, yes, it is a very nice idea, but quite out of the question for New Zealand to think of doing anything about it on its own account." This is not the idea of Professor Fisher. In a letter written in response to enquiry by the present writer under date of October 14, 1930, Professor Fisher said:
"You ask me if I think New Zealand could undertake to put into operation the ‘compensated money unit plan’ without reference to any other countries. I would reply that I think she could, but that it would be very much better if she could induce the nations of the British Empire to adopt the plan at the same time."
That is clear enough. Undoubtedly it would be much better for the rest of the Empire to adopt the plan with us. But we will get nowhere if we wait for that to happen. We need immediate present relief. The best way to induce the rest of the Empire to fall into line is to make a start here, and let them see for themselves what the plan is like in operation.
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Various plans for stabilising money have been put forward of recent years. The late Professor Lehfeldt of South Africa, for instance, advocated international control of the world’s goldmines in order to dig gold, even at a loss, so as to increase the supply. The money interest diligently talks of universal central banking as the way to stabilisation. This was what the money power told the people of the United States when the central banking swindle was put across in that country. They have put central banking across in Europe with the Bank of International Settlements, which Sir Otto Ernst Niemeyer has told us is the hope of the world. A Central Bank Bill is in course of being pushed through the Commonwealth Parliament at the time of writing. As for New Zealand, the two emissaries of the Bank of England, Sir Otto Ernst Niemever and Professor Theodor Emanuel Gugenheim Gregory, were strongly of opinion that we also should have a central bank. We shall be wise people if we have nothing of the sort while money is under its present control.
Perhaps some of our learned economists who advocate central banking will tell us why if it failed so ignominiously to provide the promised stabilisation in the United States any better results are likely to be secured by establishing it elsewhere ?
It is quite possible, of course, that the Money Power may really intend to use central banks to stabilise money. For example, it might make money still dearer even than it is today, and then stabilise it on this depressed price level for all time, or for a sufficient time to bankrupt the British Empire and every component part of it. Of course there would be enough "senseless phraseology" spoken and printed to bewilder the public and to have some of our local financiers and pedants falling over one another to lick the boots of those who were about to destroy us.
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There was recently formed in the United States a Stable Money Association. This association announces in issue No. 3 of its bulletin, "S.M.A. News Service," under date of April, 1930, that it is "the advocate of no specific solution." Its object is to direct public attention to the problem, and to promote research and discussion.
It is obvious, of course, that an association which advocates no specific solution can itself get nowhere. You have got to do something in particular if you do anything at all. And a body of men assembled together and pledged to do nothing in particular on a vital problem is not exactly an inspiring spectacle.
The president of this association is Mr. F.A. Delano, deputy chairman of the Federal Reserve Bank of Richmond. Among the vice-presidents are Mr. Otto H. Kahn, partner in Kuhn, Loeb and Company; General G.C. Dawes, for nearly thirty years head of the Central Trust Company of Illinois; Mr. F.H. Sisson, vice-president of the Guaranty Trust Company of New York; Mr. Owen D. Young, head of the General Electric Company; Mr. Charles Evan Hughes, formerly United States Secretary of State and later attorney for the Standard Oil Company and similar interests.
The above is but a selection from a list which includes eminent and distinguished persons of all nations. The connections of the above gentlemen can be instructively checked up with the list of concerns reported by the United States Money Trust Commission as constituting a peril "far greater than the combined danger of all existing combinations."
It is quite obvious that although the Stable Money Association is pledged to advocacy of no particular solution of the money problem, nevertheless a great many people interested in the problem and anxious to advance some definite plan will get into touch with it. The members of the association will thus be widely informed of movements for money stabilisation all over the world. People who are planning action and propaganda will doubtless rush eagerly enough to tell it what they are thinking of doing and to ask for its support. If, as the Money Trust Commission reported in 1913, a Money Trust then existed in the United States, and if the concerns listed as constituting that trust are still in combination today, then, it is obvious, all this advance information about contemplated moves for monetary reform in different parts of the world should be very useful indeed to it. And it would seem unlikely that any policy adopted by the Stable Money Association will be injurious to the money power so long as gentlemen associated with that power are among its office-bearers. And another question is whether what is advantageous to the money power is likely to be in the least beneficial to the rest of us.
Conundrums like these we must answer for ourselves, but it is wise to ponder them before expecting much in the way of help from the Stable Money Association of New York.
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There are critics who contend that even Professor Fisher’s scheme will not get us very far, and that we can never get far until we abandon gold. Sir Josiah Stamp in his foreword to Professor Fisher’s Money Illusion said the next ten years would probably show whether gold was to remain predominant; whether it was to retire to a secondary place, as in the Fisher scheme; or whether we would have to get right away from it altogether. Mr. Reginald McKenna, in his 1925 address as chairman of the Midland Bank, pointed out that theoretically no particular advantage attached to gold as a monetary standard. Its advantage simply is that gold has become a fetish. "So long as nine people out of ten in every country think the gold standard the best, it is the best," he said. In our grandparents’ day no doubt a physician could just as soundly have declared, "So long as nine people out of every ten think bleeding the best cure for disease it is the best cure." After innumerable patients had died from the loss of blood consequent on venc-section, cupping, and the application of leeches, the public and the physicians gradually came to a knowledge that the cure was worse than the disease. Today the orthodox are as ready to die by the gold standard as their ancestors were to pay money to the doctor to bleed them to death. It was a very respectable ending, and well worth the money, no doubt.
In a speech in Congress in 1913, Mr. Charles A. Lindbergh, of Minnesota, declared that there was a catch in the Fisher stabilisation plan. It is not too clear from Mr. Lindbergh’s speech just where the catch is, but his grounds for thinking there is one are worth noticing. The Fisher plan had then been only two years before the public. It had received nation-wide publicity, and this fact in itself made Mr. Lindbergh suspicious of it. He said:
"If he [Professor Fisher] had not proposed to standardise the gold dollar his proof that it is not an honest measure of value would have received no publicity greater than he and his friends and a few others could give it. It would have been ridiculed if he had not proposed a remedy that suited the interests, for the money sharks demand some measure that is favourable to them and not fair to the people."
Apart from getting away from gold altogether—the best plan if public opinion were ready for it—the Fisher plan does, however, appear decidedly the most hopeful of current plans for money stabilisation.
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Before we leave this part of the subject it is worth noting that several partial adaptations of the Fisher plan have been suggested in Australia. "Ex-Banker" in a column article in the Sydney Morning Herald of August 21, 1930, suggested that the Australian exchange on London should be varied according to the price of wool, as being the most important of Australia’s staple products. In view of the extremely violent fluctuations in value to which wool is subject its importance to the community would have to overshadow that of every other commodity to make it alone an acceptable basis of monetary regulation.
In November last Professor D.B. Copland, of Melbourne University, in a lecture recommended raising the exchange on London to give Australia a breathing space. The exchange is at present arbitrarily fixed by the banks, and as Professor Copland, in such reports of his lecture as the writer has seen, did not suggest any more than a further arbitrary variation in the rate with no definite basis of regulation, his plan if correctly set out, becomes merely a temporary expedient of rather a dangerous kind.
Mr. C.H. Wickens, the Commonwealth Government Statistician, was reported in November as proposing something very like the Fisher scheme. "To obtain an equitable price level," he is reported as saying, "regulate the currency so that when the price level falls the issue is increased, and when the price rises currency is restricted."
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The foregoing shows us that there is nothing to stop us from putting our monetary affairs into much better shape than at present. Nothing, that is, except ignorance and timidity. Any sensible steps would, of course, he hotly resented by the money interest and would provoke a great hubbub, and a great lot of rubbish would be trotted out in an endeavour to scare and terrify people from interfering in any way with the operations of the money power. When the Almighty endowed human beings with brains it was presumably intended they should use them. If we leave our brains behind us and continue to allow "experts" so kindly provided by the moneylenders to go on regulating money solely in their employers’ interest we get the result that we deserve—and are asking for. If we wish to make our country worth living in we will, on the other hand, lose no time in extricating ourselves from this particular bog.
Our salvation lies in doing things, not in talking, arguing and wrangling about what we shall do. At present we talk and flounder while the money interest acts with silence and certainty. We are like people who squabble all day about the particular brand of insect powder to use to rid the house of vermin. In every remedy advanced the money interest will pick holes and discover defects. If we wait for the perfect remedy we will wait for ever. The Fisher plan is practicable and capable of immediate adoption.