You are on page 1of 20
‘MINUTES OF EVIDENCE. 347 May, 1980] ‘which ho reaches rand ?—Yos, Chairman: Mz. Robertson, it only remains nk you very much for your attendance. We Thad most interesting discussion and we are tho first part of his (Adjourned til Thuralay next, THOMAS ALLEN. ERNEST BEVIN. Hi, Hon. LORD BRADBURY, G.C.B. Hon, R. H. BRAND, OMG. iofesor T, E. GREGORY, D.Se. TM, KEYNES, C.B, Ms, Anruun Kirsox and Mr, W. 3. Borros, STATEMENT OF EVIDEN ‘Tas Retaiox or Fixaxee 1. The enquiry of this Committee differs from the Previous fmancial enquiry of the Cunliffe Curreney Conmittes of 1913, as the terms of reference cloatly Bats that recommendations should be made to. pro- Maote the trade and commerce and the employment of the people. 2, had the honour to submit evidence before the (Gunite Currency Committee in January 1010 jn the form of » printed Oritcism of the Commitied’s Kirst Interim Report, and T pointed ont to the Commitice fiat the poliy'of currency-defation which they re. fomncnded, leading to a return to tho wold standard SBecrewar parts, would. produce very’ owciont Bisons “ciststore" for this country, "aad “would eval Tn: (@).A serious inflation of all war debts, and capecialy of the National Debt, oe well” ae intoret charges payable thereon (0) Destroy enterprito and eaise the corts of produetion (© Reduce the volume of trade together with vase, salaries and tho earnings of the producing Games, which would furcher reduoe the elective demand Tor goods. (@) Creato wide-spread. unemployment, mhole- sale bankruptey and general discontent, () Reduce the smoant of our exports of manu- factured gools by raising the prices of British (gota in forms of forsign curroesee (@ Would make it impossible for the Coalition Government, 0 carry out the promises made by Mr. Lloyd George a hls nesociates, (0) Towor the standard of living for th ation. whole Mr. D. HL, Ronutrsor. 15th Moy, 1990, g SUM [Continued. particularly indebted to you for producing so very Fall and careful a statement of your Ihave atudied with great interest,Thank you very much, iows, which we (The Witness withdrew.) at 4.30 pam) TWENTY-EIGHTH DAY. Thursday, 15th May, 1930. Present The Rt, Hon, LORD MACMILLAN, Chairman Mr, LENNOX B. LEE, Mr. CECH. LUBBOCK. ‘Tho Rt. Hon. REGINALD MeKENNA. Sir WALTER. RAINE. Mr. J. FRATER TAYLOR. Me. AL A. G, TULLOCH. ‘Mr. G. ISMAY, Secretary representing the Economie Freedom League called and’ examined. ITED BY Ma, ARTHUR KITSON, ro Natioxan xrunasts. 3. 1 strongly advised the Committee to Tet the currency alone, and to allow production to overtake domand, which would bring down the level of prices. ‘This would have boon the most rational method of ‘mecting the situation which existed immediately after tho War. ‘To bring down prices by deliberately con- tracting tho volume of curreney and eredit (I pre- dicted) could only end in national disaster! 4, A reference to the evidence which T submitted will show that my predictions have been fulfilled during the past ten yoars, and T estimate the Tossos that this disastrons financial poliey has inflicted on the trado and industries of this country to be ts reat, if not greater, than those experienced during the whole period of tho Great War. I believe T can claim tobe the only witness who predicted these asters 5. Wo hare experienced and are expériencing a ropotition of the disastors which our forefathers ox- perienced after the Napoleonic Wars, and as a sesuly of a similar financial poliey that was pursued after the Battle of Waterloo. No sooner had the Battle ‘of Waterloo been won, than the financiers commenced to agitate for the destruction of the currency notes issued under Pitt and his successors for enabling the country to “carry on” through that long Period of warfaro with Franco, and establish a gold basis for the currency. ‘The curreney was contracted—all war Aebis wero inflated, the level of prices was forcibly oduced, entorprise was destroyed, trade and industry wore depressed, “and unemployment became rife throughout, the’ United Kingdom, This period of ergo lad fr hist yey and ended in what was known as tho “hungry forties.” Details o Aisasters that this country experienced as the result ‘of that policy may be found in the writings of that 348 COMMITTEE ON FINANCE AND INDUSTRY. 15 May, 1990.) Mr. Arun Kursow ond Mr. W. H. Boxtox. [Continued. period, especially the pamphlets issued by Carlyle, Sir Walter Scott, and the Birmingham Boonomists in the Gemini Letters, Statistics prove that every period of currency contraction has resulted in debt- Inflation and general economic disasters. . Money is the tool of trade. Indeed its import. tance ie now so obvious that it has even boon termed the “life blood of commeree."” Doss it not follow that the volume of currency must determine the Alogree of a Nation's prosperity? What should be the Volume of the Currency that will enable British Trade to Prosper? Has any Government, Committee ‘ever undertaken to give an answer to this question? Consider the ‘unfortunate position of the average business man ‘at the present time. Governments have enacted laws making the payment of debts in legalised currency compulsory, and yet no Govern- tment so far has ever taken the trouble to. ascertain What amount of currency is needed. to enable. the people to pay their obligations promptly, nor to asure a suliciont supply 7.0n tho contrary, they dave enacted these tary laws usually” under the direct advice of neyrlendere, who. are interested in keeping. the money” supplics ‘short, and they have now handed ‘ver thie priceless privilege of issuing money to a private trading company known at the Bank of Kngland. Aud what obligations have the dizectors cf thie private trading company ‘undertaken on. behal of the publie? The Bank of England, like all other Drivate trading companies, is in business to make profits. The Bank is under no obligation to meet ti demands of British trade and enterprise. On tho ry, it is wellknown that. the. Dirvctors of ‘the ani of England do not hesitate to supply the reeds of foreign countries with British eredit when it pleavos them to do so, whilst at the samo time British trade may be suffering for lack of credit Trade & Industry Gold & Legal Tender 13, It will be seen that the volume of credit and ‘consequently the amount of trade and employment fre eonstantly varying, with the amount of gold in the Bank, [2 is ealimated that for every pound’s ‘worth of old in the Bank, twenty pounds of credit hhave been issued against it. Tt follows, therefore, that if'a certain amount of gold is shipped abroad twenty times that amount of credit’ must bo with- rawn in order t0 maintain what ie known as “3 tafe ratio” between the gold and credit 14, As London is the only free gold market, in the world, it follows that the amount of gold in this tountey is constantly varying, which accounts to a Jarze degree for the fuctuations in our trade condi- tions, and. also in the Bank Rate. Prior to the War’ the price paid by the industrial community Tor London's free gold market was the most variah Bank Rate in the Wor'!. Further, he gold star 8. Tho fundamental ovil in our financial system is ‘the fact that it ig purposely mado international in character. Tho theory that “sound” money ig ‘money that will circulate abroad, was tho one thal lod Sit Robert Pecl into the foolish errors which be made in establishing the Bank Charter Act 8 Money is always National in Character Kogland we have the pound sterling, in France the franc, in Germany the mark, and in the Unite States the dollar. Hach country has its own national ystem and there is lo money which can be asi to circulate outside of the jurisdiction of the country in which it is issued, 10, Gold is a commodity and is of internation value, but gold is not necessarily money, sovercign may be exehangeable abroad commodity oF for the purpose of repaying debt % this country. ‘This distinetion between gold and money ean readily be put to the test. Take a golden sovoreign and melt it or destroy the inseription with hammer—what has become of the money? Tt has vanished—lthough the gold may be intact, and nobody would take it for a sovereign until it hae heen recoined. 11, Money is like the King, whose power and prestige is confined to his own country. Money ceases to be legal tender outside of the country iaauing ih jnsb as the King becomes a private citizen the ‘moment he steps upon foreign sol 12, The effects of attempting to make British car rongy international in charactor has made the volume of our home trade, a2 well as our industries, depen dont to a large extout upon the amount of gold that tho Bank of England is ablo to retain in its vault ‘The following illustration will make this clear:— Trade destroyed —Gredit cancelled Gold exported ard places a limit om tho amount of currency and tredit' that can he iesued, which hae no relation to the amount of trado which the country ix capable ‘of transacting, and which should bbe limited only by the wants of the people, 15, The bulk of the world’s gold supplies ia com trolled by an international group of bankers, whowe headquarters aro in New York. As will bo soon from the diagram in paragraph 12, tho control of gold means the control of the World's trade. and Industries. Tt is surely a dangerous policy to allow this country’s financial conditions to be at the mercy of own chief industrial rival! 16. An important feature of our present financial system is that it tends to enrich the banking and money Tending interests ot the expense of the pro- ducing classes; and even when trade ie most depretaed the Banks have made their greatast profits! 16 May, 1990.] ‘MINUTES OF EVIDENCE. ‘Mr. Arun Kiso and Mr. W. H. Borzox. 349, (Continued. 47, A banking system that can flourish on the ‘of industry, ie a menace to our national ney. 48, Under any rational banking system—which all is ‘merely a means 10 an end, vin, production and ‘distribution of goods—the ity of the banks should vary directly with prosperity of trade and. industry. Unfortu ely for this country, London's banking systom is ‘international in character, so that. the pros ity of theae institutions is not entirely concerned ‘the condition of British trade. It is well mm that many foreign industries especially those Germany and America—have been built-up with ah ered and have succeeded in crippling their ch rivals. ‘Tho writer can give examples of how don bankere have jiven credit facilities (o foreign facturers, which facilities were denied to their people. 49, Tt should also be remembered that the Bank of sad, which holds the Key to the whole financial ation of thie country, is offeored vory largely Tepresentatives of foreign and overseas ‘banks, naturally seek accommodation for their own te. 20, Tho system of creating bank loans has produced ‘s.carions anomaly which roveale tho weakness of tho fal system in practice. Credits and dobto are positive and negative aspects of wealth, yet Hoth rnk eval an uaa for interest charg the far loans being an outctanding example of interest- ring debte. ‘The able work of Professor F. Soddy, PRS. on this subject is well worth the careful ‘tention of the Committee 2, The restrictive legislation regarding finance, 4g responsible in the writer's judgment for most of the economic ovils from which wo aro. suffering. Take, for oxample, the subject of municipal enter- ‘The Position of Trusty. 4, British industry. is passing through a critical period. Taking only facts which would bo acceptable fo erery membor of tho Committee it could be stated ‘that: (@) There are over a million willing workers tunable to find employment. (@) Brory basic industry condition through lack of orders. (@ An increasing diffealty on the part of firms engaged in production and retallare to make satisfactory profits, (@ Thro is overproduction in the Dominions and” countries producing raw materials and food. (©) There is overproduction in Great Britain of ‘manufactured goods of all descriptions, dus to tho latter being, Iimited to aales () An increasing number of British people aro below the * poverty Hine.” (@) The volume of the world’s trade bas in- creased slightly but the British share has diminished. in a doprosed An Bzamination of the Position, 2, There is no shortage of opinions ae to the fats of the position, infinite in'thoir variety; in- ‘eed it is postible to include reasons from sun spots fo the old proposals for harder work and longer ‘ours 13081 prise. Doss it not ssem ridiculous that not one of four great industrial centres, such as Leeds, Liver pool, Birmingham, Bristal, is permitted to’ employ the ‘eredit of ite own eilizons for creative purposes and for euch work as clearing away the slums; but is compelled %2 apply to private money lending firms (such as those run by Hatry and Co.), and pay such charges as these firms choose to make, in onder to carry out undertakings which are of the utmost Importance for the wellbeing of the public? 22,7 avon ai tp wom dom he eit of this ‘country long? Who. has crested this credit? "Is i not due to the producing clase, jor ealeyenereial ral ig eer trrerr, the morehants, the farmers—in short to both Inbowr and enptal? Where do the bans obtain the credit for which they charge such, hich rates of ne torent? Te it not from the public? And why. shoal nat tho British Government wisn tho national credit for creative purposes instead of pawning. it to the tanks and allowing them to in Wey and eo burden the tax payers with ruinous interest charge? 23, Industrial depression and unemployment could be remedied in a comparatively short time if the Government would exercise its undoubted right to employ this national credit direct to assist industry, instead of leaving the country to the mercy of the moneyplending institutions. 24, No permanent solution of our economio dificul- ties will be found ontside of = complete change of the relations now existing between finance and wealth production, No nation has erer become rich or py Perous by mere money lending. The basis of country's existence is wealth production; and unless ‘and until production ie made free from its present ‘enslavement to the banks, this country will nev again occupy its former position as the World's Icader in trade and industry. STATEMENT OF EVIDENCE SUBMITTED BY Mx. W. 1. BOLTON. ‘Twe Rerariox ann Evvror or Freaxce ox Ixpuseny. ‘A leading industrialist, Sir Arthur Balfour, dealt im a vory briof manner with the cause in a rocont address at Glasgow before the Foremen Engineers and Draughlsmen. He stated: "There was only fone answer as to why we had lost a proportion of ‘the world’s trade.” Our cost of production was too high.” Dealing with the influence of finance he went on to say: *" One thing had stood firm through- out all oar troubles our banking system. Tt was ‘wonderful how they redviced the bank rate to four er cont., but what was industry to do with its Surplus plane? Cotton for example had more plant than could be used, Wo would havo to destroy a large proportion of our machinery and work half- ‘Another prominent industrial leader, Mr. W. L: Hichens, stated recently that “ultimately | the ‘present tineconomie and wastaful individualism would be eupersaded bs international co-operation. They wanted economic trade organisation adjusting world fupply and world demand.” 3, The diagnosis that our costs of production are too high accounts for some Toes of the world trade, ‘Tho propoved remedies of lower costs, additional ‘exports and rationalisation will be examined later ‘The question propounded by Sir Arthur Balfour: “What is industry t0 do with ite suzplas plant? ” seome tobe addressed to” the bankers as it was directly asiociated with the reference to our wonder- fal banking system. The quostion is of the uimost importanea to the Committee, 4, Tho observations of Mr. much deeper and ‘nocd some practical W. L. Hichens go mathods iz