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Cheap Money

Volume 436: debated on Tuesday 15 April 1947

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There has been a long Debate about cheap money. The late Lord Keynes, to whom I personally, and the country as a whole, owe a great debt for his public work, was very definitely in favour of cheap money. Now that he is dead, I can say that his advice to me was to persevere with it. I have done so. He was most decidedly on one side in this controversy, though some of the smaller pundits who have survived him take another view. Lord Keynes wrote a famous Tract on Monetary Reform, in which he said:

"The active and working elements in no community, ancient or modern, will consent to hand over to the rentier or bond holder class more than a certain proportion of the fruits of their work. When the piled up debt demands more than a tolerable proportion, relief has usually been sought"

either in straight-out Repudiation of the Debt or in devaluation of the Currency. I believe that to be an accurate summary of history, politics apart. But there is another way of partial relief from these tremendous debt burdens, and that is by the pursuit of cheap money and low interest rates. If rates of interest now were what they were at the end of the first World War, where should we be? What would be the annual cost of the National Debt? What would the Income Tax be? What would the other taxes be? I am sure we are pursuing the national interest in seeking gradually to condition public opinion to the idea of 2½ per cent. as the maximum rate of interest on long-term loans to the British Government, and I expect to have public opinion increasingly behind me when it is realised that on the continuance of this maximum rate of 2i per cent. long-term—and lower rates for shorter terms—depends all hope of serious tax relief in the future. There is no other way in which the circle can be squared and the Budget balanced.

There has been much talk—not so much in this House but in some of the columns of the financial Press—of deflation as a sovereign remedy, for the ills from which it is thought we are suffering. I have a very poor intellectual opinion of those who take that view. They seem to me to be baleful Bourbons, who have learned nothing and forgotten nothing from the financial follies and economic crimes, as they seem to us now, committed between the wars. Let us be clear. If we were to follow through this policy of deflation, preached by some who sit in office chairs in the city of London, we would bring back dear money; we-would bring back depressed trade; we would bring back mass unemployment; and we would bring back a clamour for cuts in wages and social services and for indiscriminate short-sighted economy campaigns of every sort. In my view, this must be resisted. It is intellectually wrong and morally reprehensible. This faction of whom I speak would enthrone the usurer over all, trample the common man in the dust, and consolidate catastrophe in our national life.

So far I have assumed that these opinions are not held in this House. I have assumed that these are the more irresponsible babblings of persons not of a representative quality. But if it should so be that in this House these views are put forward, we will most gladly Debate them and join issue, quite confident that the national interest is on our side. Therefore, if these be any deflationists in this House, we say to them, "If that be your view, come out and let us have Debate and political battle in the open." The division is not entirely according to political opinions. I am greatly heartened by a remarkable letter which I have received from a very distinguished historian, who will be well known in all parts of the House, Mr. Arthur Bryant. He wrote to me—and I quote his words—

"an historian who—his Tory background notwithstanding—is deeply grateful to you for your stand against the attempt to force this country into the same deflationary course that proved so fatal after both the last war and the Napoleonic wars."

He is an expert historian, quoting from the records. He says:

"Working as I am on the tragic aftermath of the Napoleonic wars, I have reached the conclusion that. had the Government at that time corrected deflation when deflation set in, most of the social disasters from whose consequences we are still suffering could have been avoided."

He ends by saying:

"I feel this strongly, and the horror of see mg thinking men, despite the appalling lessons of the last 3o years, resorting to the same fundamental fallacy, has impelled me to write to you in gratitude."

[ Interruption.]—He has a Tory background and I think it is only reasonable that I should quote that passage. I too am very grateful to Mr. Arthur Bryant—many of whose writings I have read with great appreciation, for he is a great master of English and of his subjects—for this very powerful and expert testimony on the side of truth.

Let us look at the thing directly. Is there really a British citizen who is either too avaricious or too frightened of the future to lend money to his country at 2½ per cent. on long-term? It is more attractive on long-term, a term which would exceed the life of this Government, and the next, and the Government after that. If there be any such persons in this House—I cannot believe it, but if there be—I hope they will stand up in the course of our Debates and confess frankly their lack of faith in the future of our native land and theirs.