Inflation by Nicholson J. Shield (Joseph Shield) 1850-1927

Author:Nicholson, J. Shield (Joseph Shield), 1850-1927
Language: eng
Format: epub, pdf
Tags: Currency question, Finance
Publisher: London, P.S. King & son, ltd.
Published: 1919-03-25T05:00:00+00:00

This blowing up of the national income is supposed to make the burden of the. interest on

the national debt quite negligible. What is £400 millions of interest ? A beggarly ninth of the new national income properly inflated. Very little more than a tithe—a sort of ecclesiastical tribute for the benefit of the poor.

Just as the burden of the debt is made proportionately less by estimating the national income in depreciated currency, so also it is argued, by some people that the burden might be made stjU less by stiU greater depreciation.

It was observed by Adam Smith, that when once national debts have accumulated to a certain degree there is a scarce single instance of their having been fairly and completely paid. If the public revenue, he said, had ever been Uberated from this dead weight charge, it had been through the bankruptcy of the State ; sometimes by an avowed bankruptcy, and frequently by a pretended payment.

The pretended payment is by the depreciation of the currency. And Adam Smith states emphatically that, if necessary, open bankruptcy is far preferable.^

The depreciation of the currency, whether specific or general, amounts practically, as already

1 Since Adam Smith wrote, all nations have recognized the dangerous policy of bankruptcy or repudiation. They have still to learn that an avowed bankruptcy is preferable to a pretended payment by depreciation of the currency.

PUBLIC DEBT AND TAXATION 119

shown, to one of the worst forms of taxation. It is also a species of repudiation, and so far injurious both to public and to the private credit of the nation.

If we suppose that, in the course of time, prices will gradually fall to the pre-war level and that the stability of the foreign exchanges will be restored, in a word, if the gold standard is effectively restored, we must face the real burden of the interest—^that is to say, if it is a burden.

Let us consider now the pleasing fiction that the payment of interest is simply a transfer by the tax-ga,therer from one set of pockets to another set.

We may begin by comparing the pajnnent of interest on the national debt to the pa3nnent of the interest of the debentures of a great company. The company has issued the debentures to get new capital, and if the venture is sound, the com^ pany earns, not only the interest on th? debentures, but something over which goes to swell the" ordinary dividends.

But if the company can no longer earn the debenture interest, the only alternative is to go into liquidation and pay back the borrowed capital.

The interest for the national debt must also be earned—earned from year to year. In the last resort, if the State takes a larger share from the great national dividend, so much less must be left

for distribution between the other claimants: namely, the three great factors of production— land, labour and capital.

Consider first the case of land.

Taxation of (i) land values used to be a popular cry, though the bloom has been rubbed off by the expense and trouble of the valuation.

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