BANKING POLICY

Ashburton Guardian, Volume 54, Issue 155, 13 April 1934, Page 8

BANKING POLICY

THE STATE AND CREDIT.

EVIDENCE BEFORE COMMITTEE.

, (Per Press Association). WELLINGTON, April 12. Examination of representatives of the Associated Banks, in amplification of their statement of banking policy in New Zealand, presented on March 7, was resumed to-day by the Monetary Committee. The banks were represented by Messrs J. /Shaw, E. C. Fussell and T.< G. A. Harle. Mr W. Nash, M.P. (Hntt) said that everyone at present was complaining of a shortage of money, and asked Mr Fussell the reason. He replied that ‘/ it - was lack of confidence, or lack of sufficient avenues for profitable investment. A man could obtain money from the banks, but he would not use theft money unless he could use it effectively. There were not sufficient avenues for the profitable employment of money.-There was lack of confidence in the prospects of profitable'trading. That was the immediate effect of conditions overseas, caused by the depression.

Mr Nash: But trading is on the increase in the Old Country. Mr Fussell: It is on the up-grade, and more money is being used. Mr Nash: Cannot that be made applicable in New Zealand. Mr Fussell replied that so far as the banks in New Zealand were concerned, if more money was wanted it could be had.

Necessity for Gold. To further questions he said there was no real banking reasqn making it necessary to hold gold in this country. Public securities would do as well. To a certain extent the holding of gold here was a loss to New Zealand, but the knowledge that gold was held here had a distinct .value of its own .in bad times. That knowledge gave a sense of security. If money were issued by a credit board , under political control, there would be the danger of inflation, and other aspects, besides economic aspects, would come into the question. Replying to questions asked by Mr F. Langstone, M.P., Mr Fussell declared that London had no. dominance over finance in New Zealand. The hanks just settled their balances in London and that did not give London control over finance in New Zealand. He stated that the banks were willing to lend more at present, but could not because people could not borrow. Mr Langstone. What caused prices to fall? They do not fall of their own yolition. Mr Fussell: One cause is the increase of supply in proportion to demand.

Mr Fussell went on to explain that „ it had not been the policy of the banks' to call in overdrafts. When they asked a man to reduce his overdraft it was done in his own interest, because his business was getting unsound.

Issue of Credit. Asked by Mr Fussell what fault he found with the banking system, Mr Langstone said that he found fault in the banks trying to cover up the fact that there was such a thing as a costless issue of credit. Mr Fussell: The banks do not get any more value than they give. The hanks do not consider anything costless that involves them in debt. Mr Langstone asked whether, if the Banks had the legislative authority of Parliament, they could avert slumps by issuing securities to. people without assets. Mr Fussell said that he considered it could not be clone that way. When inflation . started it was very difficult to stop it.

jMr Langstone: Then the State is the only authority, that can do it? Mr Fussell: The State is the only authority that can give the people money

Mr J. IST. Massey, M.P., asked Mr Fussell for a definition of costless credit.

Mr Fussell: There is no such thing. It must cost somebody something. Mr Massey: Do the banks make profits by manufacturing money? Mr Fussell: The banks put value into a liquid form. They do not create it.

To Mr H. M. Rushworth, M.P., Mr Fussell said that purchasing power existed and was turned into evidences of purchasing power by the banks, which was a wonderful service to humanity. Mr Rushworth: So you say you represent those on the box seat; I represent the submerged tenth. Mr Rushworth asked if there was any fundamental reason why the Government should not issue notes 'listead of .borrowing overseas. Mr Fussel: There is a a political reason. If £10,030,000 is issued, the people will say, “Why not £100,000,000?” , Mv Rushworth rejoined that New Zealand was being forced by circumstances to run, the risk of that danger. At the conclusion of the sitting, the chairman said that the committee was aoreeablv surprised at the vast amount ,of information imparted by the representatives of the hanks.