THE STATE AND THE BANKS.

Auckland Star, Volume LXIII, Issue 288, 5 December 1932, Page 6

THE STATE AND THE BANKS.

There can be no doubt that the decision of the directors of the Bank of New Zealand to oppose the raising of the exchange is founded on considerations of national welfare, but it is equally clear that it is good business for the bank to "grant" to the State the right to use £2,000,000 of its own credit. It would l>o interesting to know whether the bank proposes to, create this £2,000,000. As it is not conceivable that the bank has £2.000,000 of legal tender lying idle, it is reasonable to infer that the money will be created if the Government decides to accept the financial assistance offered. That the bank is better qualified than the State to create £2,000,000 of new money, !and to have the right to exact tribute from the nation for exercising a national privilege or prerogative is surely a circumstance that should cause us the greatest concern now that we realise that the misery of the nation » due to the failure of our financial system ana not to the failure of our harvests or the laziness or incapacity of our people. When shall we realise that "the State should issue own money, and that it could use its own credit? If it is right for a bank to inflate tho existing currency by the issue of £2,000,00U new money and charge interest thereon, surely it would b*e preferable and more to the national welfare if the promises to pay were issued by the State. Should we have less confidence "l notes backed by the State than in the promises to pay which could never be fulfilled by the .banks? We have only to remember that Jon" Bull's- "Bradbury*" were as pood money a* Bank of England notes and that they helped to win the war without am- burden of interest. PETER -MELLOR.