LOANS AND CURRENCY.

Auckland Star, Volume LXIX, Issue 300, 20 December 1938, Page 10

LOANS AND CURRENCY.

In the letter 011 the above subject "Depositor" inquires if the Minister of the Crown realises that the proposed 14,(100,000 local loan will lie of 110 for the purchase of jmports. "Depositor" should know that jf the loan is used to purchase local production for the purpose of exchanging it for certain imports that cannot be obtained 111 New Zealand, then the Minister's statement is quite in order, as the loan is the indirect medium of exchange. What many people would like to know is why the Government should need to raise a loan at all when it has the power to create the money l»v means of tlio Reserve Bank bv writing an overdraft 011 tho bank, much in the same way as the trading bank* do when they wish to purchase a site or a building. I have never )iear<l of a private trading bank paying interest on issues of credit used for its own purpose. As a matter of fact, the trading banks honour their cheques when presented and cancel it out of existence. As the Reserve Bank is the property of the people, it iS both logical and feasible for it to follow the lead of the private trading banks in all issues of credit needed for national purposes. (J. F. HOLIBAR,

In an endeavour to educate the member* of the Government, a correspondent "Depositor"' makes two statements on loans and currency. As the Ministers to whom he refers will ]irobably not reply to his assertions, I do not wish them to go unchallenged. In his first statement he says: "We hear that the banks in Sydney refuse to exchange Xew Zealand notes for Australian currency.The position is exactly the opposite; the banks will exchange Xew Zealand notes for Australian. In hie second statement he says: "We propose to raise a £14,000.000 loan here, and a. Minister of the Crown says it is partly for the purchase of electrical equipment. Does the Minister not realise that Xew Zealand internal loans are of no value for the purchase of imports?" I should like to point out to "Depositor" that in this statement also he states exactly the opposite of fact, for internal loans are of very great value in the purchase of imports. The loan, or part of it, will be used to pay the dairy farmer in Xew Zealand for his produce, which then becomes the property of the Government. When this produce is sold in London the funds are immediately available to the Minister for the purchase of his equipment. J.T.