BANKS AND LOANS.

Auckland Star, Volume LXVI, Issue 238, 8 October 1935, Page 6

BANKS AND LOANS.

RIGHTS OF CURRENCY ISSUE. (To the Editor.) Sorting out isolated fragments- from my speech at°Northcote to suit himself, your correspondent "R.T.E." challenges my statement that "banks do not lend deposits as regards savings and idle balances." However, if your correspondent will peruse the Macmillan Report, page 34, he will find that in actual practice the bulk of deposits arise out of the action of the banks themselves, for by granting loans, allowing money to be drawn on overdraft, or purchasing securities, a bank creates credit in its books, which is equivalent to a deposit. And as money is not wealth in itself, it follows that the credit mentioned must be the people's credit. "The banks create the means of payment out of nothing."—R, Gi Hawtrey, Assistant-Secretary to HAL Treasury. "It is a mistake to suppose that bank credit to any important extent is created by payment into the banks."—Encyclopaedia Britannica. Furthermore, in his debate with Major Douglas the Assistant-Secretary to the Treasury stated that trade depression arises from faults of the banking system in the discharge of a vital function. But why should any private concern whose chief business is to make profits for shareholders have a monopoly of the issue of currency? Surely that function should be the prerogative of the King. It is a well-known fact that banks pay a small amount of interest 011 fixed deposits because it helps to corner the credit market, and that it is this monopoly of credit that cripples the world and causes so much misery, degradation and poverty. JOHN GUIXIVEN.