Money supply
Sir: There you are, you see? I tried to make it simple, and by the ver" next post you get a letter from
.1 man who doesn't understand. m„; Hornsby (Letters, December ai,; Invites me to have "another stab. With your permission I will try re spell this thing opt. Mr Hornsby is confusill " wealth " with "money." When said that too much money causeu inflation, I didn't mean that people became richer and could afford t° pay inflated prices. I meant there was too much money, doubloons, pieces of eight, five-pound-notes. and all those entries in the ledgers.; Once this point is grasped it C5, be seen that the rise in prices is, reality, a fall in the value money. In Germany, during Schacht's inflation, you had " carry the stuff about in a suitcase. When this happens, everybodY would rather have goods thall money. So they buy houses, au; central heating, and works of erj" and Ford motor cars and, course, they strike for higher wage:: In other words, the Tory ce)..1'; viction that higher prices " caused by higher wages, and t"" Labour conviction that wa,..g.e; demands are caused by hil3"..`i prices, are both wrong. Now, that extraordinary? The Wall thing is caused by the flutter 0. paper money, or if you prefer inu to be technical, the fiduciary issuer' So much for inflation. The otl?e,, side of the coin is equally fatn't to us. I always do a small amotirl, of head-shaking when I hear 11'. Jenkins boast of the balance:°A payments surplus he left behld't him and, in the same breath ra„1,1.,1,3,1 the Tories for nearly a nin—r unemployed. And who does 1"1 Jenkins think was the architect 0.'t the million unemployed? WhY, was Mr Jenkins! He tried to icr",„ the value of money up, in order ‘..", get his blessed surplus, not to Mei' Spectator December 16, 1972 tion all that business of saving the pound. Under his aegis the banks weren't allowed to lend any money to anyone for anything, hire-purchase was severely curtailed, and there was an "export or bust" ukase which deliberately set out to throttle the home market. This was galloping deflation, and before you could say Jenkins there were nearly a million unemployed.
Well, how do we get some equilibrium into this thing? Until the days of Ramsey MacDonald the pound was based upon gold. It then became based rather precariously, not to say quaintly, on the dollar, which was based upon gold. At least it was based upon something. But now the dollar itself is divorced from gold, so the pound isn't based on anything at all. It floats. What on earth did everybody think would happen? The only suggestion I can make is that the conduct of affairs should be taken out of the hands of chancellors of the exchequer and prime ministers, and the Treasury and the Bank of England, that we recognise the fallibility of human intellect, and we get somebody to build us a nice, intricate and authoritarian computer, into which is fed, weekly, the price of all goods, the price of all services, the amount of all goods sold and services rendered, the state of the stock market, all foreign exchanges, profit margins, investment, and the national state of mind. Failing this, the Heath-Pompidou relationship may require the pound to be tied to the franc. If so, God help us all.
Anthony Gibbs
Spurfold House, Peaslake, Surrey
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