BURDEN OF INTEREST.

Auckland Star, Volume LXVII, Issue 139, 13 June 1936, Page 17

BURDEN OF INTEREST.

"Barrister" has professedly and confessedly concluded his case for more money. I was always of opinion that my money was in short supply, but uncertain whether this could not be remedied by adding a cypher to the figures expressed on the notes, without any extra cost to the printer. His illuminating definition of money as "nothing for something, but necessary before you can buy anything," gives his case away, as you cannot well distribute "nothing." Even cheques, if only paper, are something. Then there is the question of turnover, or velocity of circulation, of these bits of paper. De factor, these are the outward and visible sign of an inward financial ability to dub up something, and serve much the same purpose as a merchant's set of account books. "Barrister," however, fails to distinguish between the intrinsic and the extrinsic, the esoteric and the exoteric nature of money, and, to cap all, confounds money with credit. Would he include a valueless cheque in his definition of money? Apparently he would, for he says, "The trading banks are receiving interest on approximately £40,000,000, which they do not, and in fact never did, possess." I think he will allow that a cheque, in order to pay, is a paper record of an exchange transaction, and simply a handy substitute for printed notes. There is then no necessity for the note issue to equal all the goods, services and values, past, present and potential, as suggested. The banks certainly deal in credit, but no one is compelled to do business with them, and there are enough notes in existence to do without them. Cheques are a handy equivalent for notes that might be stolen, get lost or destroyed in many ways. Again, the issue of additional money in notes will not absorb the surplus unemployed labour, resulting from changed methods of manufacture and production. The unemployed have frequently paraded with banners stating, "We want work, not charity." His prejudice against banks prevents him from realising the advantages of extended credit in trade and commerce. I append for his consideration an extract from evidence given by Mr. L. G. Melville, Federal Bank economist, before the Banking Commission in Sydney. He says: "In general, loans by banks' to customers must increase or decrease in ratio with the increase or decrease of deposits. Banks did not vary their credit policy altogether on seasons and prices, but they watched carefully a declining ratio of deposits to loans. Bankers were slow to act on falling markets, preferring to wait for a turn of the tide." E.N.D. (This correspondence is closed.—Ed.)