LOAN DEBENTURES.

Ashburton Guardian, Volume XXXV, Issue 8250, 22 September 1915, Page 3

LOAN DEBENTURES.

THE £1000 RESTRICTION REMOVED,

VARIOUS SUGGESTIONS DISCUSSED. (Per Press Association). WELLINGTON, September 21. A Governor's Message this afternoon introduced an amendment to the New Zealand Loan Act, passed a. few weeks ago. The Minister of Finance explained that the object of the amendment was to remove the limit of £1000 fixed as the amount which could be taken up in one debenture. Since the Act was passed, he said, enquiries had been made for a much larger sum in one debenture, and to prevent a stoppage in applications for debentures it was proposed to strike out the limit. In this way an applicant could take up £10,000,. or £20,000, or £50,000, of the loan in one debenture, and, on the other hand, he could, if he wished, take up £5 debentures.

Mr Hine suggested that the Government Departments should not be allowed to subscribe to the loan, as they were largely used by the farmers for financial assistance.

Mr Wilkinson' .asked the Finance Minister to make the flotation of the loan a popular one by appointing every Post Office Savings Bank as a place for receiving applications and deposits.

Mr Payne expressed the opinion that the flotation of the loan would have a serious effect on the farmers by reducing the amount of money available for mortgage purposes, and thus increasing the rate of interest. He urged ah additional note issue as a preferable course, and the compelling of the banks operating in this country to keep at least a gold reserve of 33 l-3rd per cent, against current deposits. He declared that on April 1 of this year the banks in this country had £1,500.000 deposited with them, none of which was interest-bearing to depositors, yet was earning a .large interest for the banks.

Sir Joseph Ward, in answer to a suggestion by Mr Sidsy. that provision should be made to allow debentures taken up in the loan to be devoted to the payment of death duties, explained that the loan was a- Public Works loan. If he agreed to allow investments to be made for the purpose of paying death duties, it would mean that the amount practically ear-marked for interest in the Dreadnought and other Defence purposes out of death duties would not be available, and the Consolidated Revenue Account would thus be seriously hampered. As to Mr Hine's comment, the Minister agreed that it was not desirable for the Public Trustee and the State Insurance Department to take up debentures. He could assure members, however, that no great restrictions had been added in the way of financial assistance to settlers by the State Departments as a result of the war. Money was being lent as usual, but there'was a little more care exercised about the margin. If the loan were subscribed for largely, as he had every hope would be the case, then it would be his duty to keep open the ordinary State channels of assistance. Discussing the suggestion put forward by Mr Wilkinson.' Sir Joseph said that all Money Order Post Offices would be used for the issue of debentures. Originally it was contemplated to issue £1 debentures, but the difficulties were found to be too great. It was proposed to arrange a system of transfer, so that depositors would not have to draw their ,money from one place and go for their debentures to another.

Coming to the arguments of Mr Payne, the Minister of Finance declared that, however strong might bo the case for the establishment of a paper note issue in New Zealand, it would be very unwise for the Government to attempt anything of the kind at tho present time. There were, in fact, many arguments against the issue of such notes. Theoretically it might sound quite possible to say " Issue paper money to save paying 4£ per cent, on the loan, y but the normal consumption of notes in New Zealand was only £1,700,000 per year, while during the war period the highest amount had been £2.600,000 worth of notes. Surely no honourable member, therefore, would say that if the people only used £2,600,0uu in war time, the Government could, by the issue of an additional £2;000,000 or £10.000,000 in.notes," gst the people to use them if they were. not required. He recognised there was a great deal to bo said for Treasury notes, but no Government would be warranted in following the suggestion made by the member for Grey Lynn at present. In reply to an interjection that Great Britain was issuing notes, Sir Joseph pointed out that the Banlc of England had a charter, and they would find the gold and bullion reserve to be in proportion to all liabilities incurred.

One of the difficulties between England and America, financially, at the present moment was the fact that the Americans, who had a large supply of gold to meet their, financial requirements, were afraid that England would send over gold only for the purchase of munitions, etc. England herself wanted to retain her gold for the purpose of holding a proper reserve, but when she threatened to send gold to America the exchange went down to zero almost at once. They would, as a matter of fact, find that very little of the £100,000,000 loan would be paid in gold at all, but a sort of financial clearing-house would find the balance in ordinary exchange. Were England to go in for a 'paper issue without a gold reserve behind it, she would lie in the position, as most, people believed Germany, would be after the war, of suffering an enormous depreciation in the, value •of property and of individual assets, with an enormous amount of unemployment all over the country. In all probability Gerinfiny would for a long period of years be in a financial position which would probably stagger the world. England, i on the' other hand, was saving gold, and England was the country that was going to feel the war less than any other country in her present financial policy. -