CORRESPONDENCE.

Auckland Star, Volume LXVII, Issue 141, 16 June 1936, Page 14

CORRESPONDENCE.

POINTS FROM LETTERS. THE BURDEN OF INTEREST. The burden is imposed by the borrower upon himself because, and only because, he chooses to borrow. ''Barrister" in his final letter on this subject says the burden is primarily due to a shortage of legal tender, but I am sure he has always been able to obtain the required quantity from any bank provided he could furnish a proper title to same. As a matter of fact banks always have "till money" in reserve for the purpose of meeting possible demands. Perhaps my friend would be satisfied if bank counters contained a receptacle full of State notes -with the words "please take one" printed thereon. There would then -be no necessity for anyone to borrow, but a "catch" would exist, in that the notes would rapidly become worthless. "Barrister" is still worried about . "counterfeit" money involved in the cheque system, but he should remember that it is the 'people, not the banks, who issue the cheques; therefore, he must be least-regard those who deal in overdraft cheques as a band of criminals. Interest which is paid to banks should, according to my friend, be paid to the people who supply goods in exchange for overdraft cheques; the banks would then receive nothing for their services in accommodating borrowers airtl enabling them without any payment to effect an immediate settlement with suppliers to them of goods, and the suppliers would receive the interest as a bonus. The sellers of goods under such a policy would be even luckier than the recipients of free State notes. 'My friend has evidently ignored my suggestion that he should examine carefully a bank balance-sheet, for it is there plainly revealed that legal tender forms, and has always been intended to form, a comparatively small part of the assets available to meet bank liabilities, the securities furnished by borrowers being in the last resort the main asset. It is, of course, admitted that banks pay interest to fixed depositors, and also paid 4J per cent interest to the Government for the right to issue notes, for the purpose of always having sufficient legal tender to meet the demands of deposits resulting from advances; my friend is, however, wrong and contradicts himself when he states that legal tender is kept out -of circulation during the period of fixation. "Barrister" states that the banks are entitled to all the legal tender in the country; I as a bank depositor have all along been under the impression that I am entitled to some of it, but perhaps I have been labouring under a delusion and next time I present a cheque my bank will ask for interest before complying with my request. If this happens to be my experience I shall begin to think there is something in my friend's contention that banks can perform miracles. ANOTHER BARRISTER.