[To the Editor of the Siscra.Ton.] Sia,—I expect there are
many who are like me in being exceedingly ignorant of financial matters, either through apathy or from a. feeling that finance is a mystery beyond the comprehensiori Of those. who have not been specially trained in it. But since of late so many gifted writers have been loudly proclaiming that the very foundations of the science of Economies (or to use Professor Soddy's Aristotelian phrase, " Chrematistics ") are faulty, and that most of our present discontents are due to this faultiness, it is difficult to preserve any longer an attitude of detachment.
But it is almost equally difficult to get any clear explanation of the rationale of the financial dogmas one hears expressed. Those who think they know will sometimes explain to the ignorant that the world of finance rests upon the elephant of credit and exchange, and the elephant upon some sort of golden tortoise, but further inquiry is generally discouraged as savouring of an envious lack of faith or a disreputable heretical Bolshevism.
And yet one who comes fresh to the subject without any preconceived dogmas to guide his prejudices cannot help seeing that it is only on slippery words and phrases that the golden tortoise walks. The creed of the financier seems to be as full of contradictions and superstitions, and to be ex- plained in a jargon as obscure and irrational as the most superstitious religion of Egyptian polytheist or African fetish- worshipper.
As the Spectator has now taken a hand in exposing the shakiness of the foundation on which the whole edifice stands, I should like to be allowed to ask a few questions.
In Banking and Currency, by Ernest Sykes, the Secretary of the Bankers' Institute, on page 58, we are told : " In all systems of note issue . . . the most essential feature is the maintenance of convertibility into standard coin," and that the sole reason for this is " that the maintenance of converti- bility is the most efficacious means of insuring against an over-issue." Mr. Sykes continues : " An issue of incon- vertible paper may retain its value and perform all the func- tions of money so long as its amount is restricted, but experi- ence has shown that the power of issuing an inconvertible paper currency can rarely be exercised in moderation for any length of time, and that the temptation to abuse the power of issue is so great as to be almost irresistible. Particularly is this so in the case of the Government of a modern Democratic State, which is always subject to severe pressure from those elements of the population which desire social reforms at the expense of the State without counting the cost." • Now we have at present a Government note issue which is, as Mr. Sykes is careful to tell us, 'though convertible in law yet inconvertible in fact. One naturally inquires who is the ultimate authority who issues, regulates and limits the issue of Treasury notes. Strange as it may appear, nobody— at least nobody of the ordinary hoi polloi—seems to know, or even to eate. I do not know myself, and I have not yet been able to find out. I therefore ask '1". If parliamentary sanction for every issue is required; can there be more danger in the power to use an inconvertible currency than there is in the power to impose taxes ?
2. Is 'there any logical reason whatever why Government paper money, should be convertible into gold ?
3. Is there any sound reason why gold coin should continue ..to be legal tender ? Is it not a fact that even now it is not international legal tender ; that there is, in fact, no such thing
as an international legal tender, but that merchants must make theii own ariangements as regards what commodity they wish to be paid in ?
4. Professor Jevons, in his book Money, quoted as a still useful authority by Mr. Sykes, says : " As long as the notes and the gold cnins which they pretend to represent
circulate on a footing of equality,""they, are as good as con- vertible." But I, through lack of financial training, am totally unable to see why they should ".pretend to represent" anything at all. Jevons says that "inconvertible notes are always expressed in terms of money," meaning, I suppose, in terms of metal money. But though such is the custom
I cannot see why it must continue to be so. There .seems to be no reason, apart from custom, why Treasury notes should be called " pound " notes any more than bushel-of-corn notes, or ton-of-coal notes, or gallon-of-petrol notes. If they were called simply " units," would not their value in terms of commodities, including gold, vary according to the number issued, and could not Parliament regulate as it pleased.? Could not home prices, as distinct from international prices, be stabilized by this means ?
5. As regards merchants trading with foreign countries, what is there to prevent them from making their bargains in terms of gold by weight, since the plea put forward by Mr. Sykes that it would cause inconvenience in calculating small sums has no force when we are dealing with international trade ? If all the Governments of the world were, and were known to be, perfectly honest, would not gold disappear even as an international standard ?
6. Is not the cult of mystery an essential part of the business of the financier, and is it' not a fairly reliable general rule that where•there is mystery, there humbug and fraud have a tendency to creep in ? Is it not a fact that words are used by financial writers in the newspapers in double senses in order that when a proposition is admitted.to be true in sense number one, an altogether different proposition may be smuggled through by the simple method of quietly changing the meaning of the essential word to sense number two ?
7. What is the fundamental difference between banking and " long-term " business ? —I am, Sir, &c., HAROLD W. IL HELBY.
Whitley, Coventry.
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