THE PUBLIC CREDIT.

Auckland Star, Volume LXVIII, Issue 259, 1 November 1937, Page 6

THE PUBLIC CREDIT.

I cannot understand Mr. Johnston's eonItention, except it be that certain transactions may be undertaken by private banks, which if done by the State, is a swindle. He seems to assume that money issued bv a private bank is a charge on that bank. It i* nothing of the kind; it k a charge on the community in which it is issued. Take a pound note to a bank and what will you get? Xothing. With it you can obtain your needs from other members of the community but you <*et nothing from the bank. Thus the people, with their goods and services, honorr the bank's promise to pay. Xow suppose the Government wishes to build a house. It can borrow £1000 at o per cent from a bank, and £1000 new money is created With this money the material and labour for the house is obtained —not from the bank, be it noted—but from the people. The 5 per cent interest must be collected from the people, either bv the Government in the form of taxation or bv the tenant of the house, who gives services to other members of the community to obtain the necessary money. If the £1000 is repaid, this is collected also, is paid into the hank and cancelled. But as the State usually borrows in arge sums, the repayment ami cancellation of these large sums of money is impossible under the present system, owing to the severe deflation which will occur when the money is cancelled, so the money is added to the national debt and becomes a permanent tax on the people. (About ; , third of the present taxation goes to pay interest on borrowed money.) But instead of borrowing, it creates the £1000 Use t exactly as did the bank; with the monev it obtains the material, etc.. to build the house Instead of paying f> per cent interest it uses tins payment as ;i sinking fund. At the end of 20 years the debt is wiped out and the Mate, with the revenue derived from the house, can reduce taxation. Which is the better for Xew Zealand? Jf a person makes a few silver coins ] 1P N so „t to gaol; if a mivafr bank creates £1.000.000 to lend at interest it is n ]„„;,;„,.„„ 1 H,m . at ~ , ' a legitimate traiir~acti.ni, apparently, but a swindle if done bv the State! | PLALV BILL.