BALANCING THE LEDGER.

Auckland Star, Volume LXVII, Issue 59, 10 March 1936, Page 18

BALANCING THE LEDGER.

I had in my possession as a curio a .erman ~otc promising to pay ten million marks; it was certainly irredeemable for value, had been legal tender m Germany and yet, although according to "Barrister" it fulfilled all the requirements of a currency note it was worthless as a medium of exchange The reason was simply lack of confidence on the part of the German people that the note had any backing and could some day be redeemed in wealthour currency would suffer a similar fate if certain schools of thought had their way and pave State notes to people as "purchasing power," for the notes would become bank credits without corresponding debits, thereby continuously and permanently, increasing the volume of currency, while the wealth exchanged for the notes would bo consumed, the food part of it probably in 24 hours. "Barrister" states tliat it is erroneous to suggest, that a otate bank can give value for its notes. A State bank would be owned by the community and my friend is therefore of the opinion that it is impossible for a community to meet liabilities Ho contradicts himself in that on the one hand lie declares" that the necessity to ever redeem notes does not exist, while on the other lie says that counterfeit money is effectual only while its illegality remains undiscovered. If the notes have never to be redeemed and incidentally do not inflate, why worry about the number to be issued of whether they are counterfeit, or about declaring them legal tender, or the establishment of a State bank wliioli must mean that its notes are to be on the same footing as bonds with a public guarantee. Barrister says that gold is completely out of the money picture, but we find that some countries are on the gold standard, Germany amongst them, and that depreciated currencies in the other countries are valued in relation to gold. The word "pound" appearing in any document can only, unless otherwise defined, mean "a sovereign costing approximately its face value to produce." Therefore my friend cannot lightly brush aside gold currency. He is right when he says that the sufficient use of cheques, which are merely debit and credit instruments and cannot cause inflation, could practically eliminate other tokens, but the cheques would still be based on the metal measure of value. He says that a bank is no storehouse, but thousands of people, including probably "Barrister" himself, are content to use it as a safe repository. At the end of his letter he wishes me to ask myself "whether any trading bank has ever done anything beyond authorising some members of the' community to claim goods and services from others," presumably without the consent of the latter or the former possessing any right to claim. I cannot see that a bank confers any such authority, but I do notice that my friend's contention does not coincide with his opinion that banks create money to lend at interest for themselves. ANOTHER BARRISTER.