Prom Our Cif!, Editor
THE drop in the Treasury bill rate and the perceptible unfreezing of the gilt-edged market are probably due to the fact that a correction of the anomaly of the present bank rate (even 3 per cent. is too high) is imminent. It may indeed have been achieved by the time this appears. There has been so far no intelligent explanation of why the rate ever attained its original figure or why its descent from that figure has
been so unconscionably slow. The
reason for the slowness, as the Financial News suggests, is probably pure tradition, which exacts a fortnightly interval between alterations, and probably it was pure tradition and observanee of rele of thumb that was responsible for the original rate.
Certain:y the imposition of the 4 per cent. will go down to history as an example of the monumentally meaningless—nor is this the opinion of a stray body of economic radicals. The step has provoked not so much the criticism as the objurgation of authoritative and nationally respected specialist publications, and I have not come across a single authority who professes either to understand or approve it.
ELEUSINIAN CAMARILLA It appears to me a dreadful thing that measures of this nature, so widely affecting the well-being of every one of us, should be undertaken without the approval of Parliament by an eleusinie.n carnarilla responsible to nobody but itself. Apostles of totalitarianism are very fond of pointing out that highly technical problems such as those of currency and credit are above the heads of a democratic assembly.
I cannot imagine Parliament making a bigger hash of anything than has on this occasion been made by the experts, who have clearly shown that they do not know their own job. The banking fraternity, who even when acting in loose conjunction with the Treasury, are the real masters of the situatioa, are no doubt adepts at making profits for their shareholders. But such restricted aptitude does not by any means fit them to be regulators of the national flow of credit. The Interests of bank shareholders and those of the nation are not coincident,
It is' impossible to deny that popular education In the matter of finance has since the last war been appreciable, and unless the black-out on discussion goes far beyond anything that is likely to he tolerated e.ertain truths are bound to Rink in. One of these is that the war can ill the main only be paid for by the sacrifices of the present, and that the "burden on future generations " is largely one inflicted of our own choosing and Is not created by the exigencies of the conflict.
The real burden on future generations re, of course, imposed by certain results of war which may be summarised as follows: 1. The care of the wounded and their dependants.
2. The making good of the deterioration in the upkeep of capital goods, such as houses and railways. and of the results of the failure to expand them in accordance with the nation's needs.
3. The repair of physical damage to property caused by enemy action.
A fourth form of damage, namely, the payment of an indemnity to a victorious enemy. lies, we. may presume, outside the realm of probability and fruitful discussion.
MOST CONSIDERABLE Of the first three charges enumerated the first is the most considerable. Our war penelons bill from the last war was enormous, and there was no alternative but to pay It. No financial legerdemain will do away with the fact that unless the war-crippled and war-wounded are looked after by their own contemporaries they would starve and die. We could, I suppose, start building homes for them now, and possibly plant fruit trees specially to supply them, but that would hardly be a practical policy, and in the main these matters must be the concern of the post-war taxpayer.
AS THOUGH BY MAGIC
For the rest, however, the burden is very inconsiderable. Not even modern engines of war can inflict damage on our plant which industry would be ineapahle of repairing in a few months' time. It will be remembered within how short a period the devastated areas of France disappeared as though by magic after 1918.
The burden on future generations constets then almost entirely in the interest and amortisation of loans, and a large part of these payments are simply the fee we pay to the banks for using their power of exploiting the credit worthiness (i.e., the ability to produce goods) of the nation as a whole.
Fortunately for us circumstances will themselves prove a corrective to this absurdity, There are limits to the practicable ratio between the national income and the national debt, and those limas were very nearly reached after the last war.
MORE PRUDENT AND HONEST
We can, of couree, go On piling up debt to our heart's content, but it would surety be more prudent and more honest to keep our debt within our capacity for payment, and to resort instead to the cleaner instrument of taxation. I have endeavoured to explain elsewhere that the so-called " borrowings " of the Government involve a tax speedy and onerous on the nation as a whole, but that whereas the working classes pay this tax it is the well-to-do who receive a special reward for its infliction.
INFLATION AND THE CENSOR
The Censor's order to journalists to say nothing that might appear to indicate that an inflation of currency or credit had taken place has been quoted in the House of Commons and thus become public property.
It is high time this preposterous injunction, which has infuriated every economic publicist, was rescinded. It is already being virtually ignored by our leading financial contemporaries.
If and when an inflation takes place the enemy will know it precisely as every moderately instructed person over here will know it—by inference from certain known data The chief result of the present rule is to attach a needlessly sinister character to the expedient as though inflation were something in the nature of unnatural vice. Inflation in normal times is thoroughly undesirable. Inflation in war is an entirely different matter.
MIGHT BE NECESSARY The burden of modern war is SO tremendous that it may be impossible to raise the necessary revenue by orthodox means. It may therefore be necessary to inflate credit, with the result that prioes rise and transfers of the power of demand take place as from the mass of the citizens to the beneficiaries of the inflated credit, viz., the Government suppliers and the State.
The method Is not a happy one, but it Is preferable to having no practicable method of carrying on the war, and its application certainly does not prove that bankruptcy is imminent. To forbid people to say that inflation has occurred In circumstances where the fact is known to every economic tyro (should such circumstances occur), does two-fold harm. It causes people to take a needlessly gloomy view of what hae happened.
But what is worse, it makes it impossible to focus the spotlight on the money-lending minority to whom Inflation brings huge indefensible gains, paid for directly out of privations, the necessary and inevitable privations, of the ordinary public. An immunity Is thus conferred on one of the vilest and meanest forms of war profiteering.