N.Z. MONEY AND THE BANKS

Auckland Star, Volume LXXV, Issue 290, 7 December 1944, Page 4

N.Z. MONEY AND THE BANKS

I (To the Editor)

During the past few years, and particularly during recent months, the people of this country have displayed a much keener interest In our monetary system, but it is regrefc table that the system should be confused by ill-informed comment A typical example might be quoted from the current Issue of a local trade journal: "What of the future and of interest rates after the war?. If goods become available and can" be bought freely, then the present excess supply of money will be absorbed." This statement, in common with many others of a similar nature, is quite incorrect The "supply of money" available for spending includes notes and coin in circulation and deposits with the trading banks and other institutions. The volume of deposits is not affected in any way by circulation. Each transaction depletes the deposit account of one individual, while that of another is increased to the same extent. Consequently, the volume of spending power is not altered, and the method of dealing with it remains one of the biggest problems of the post-war reconstruction period. This illustrates one of the real and pressing problems which face us in these times, and it is doubtful whether any of them will be solved merely by the expedient of State control of the Bank of New Zealand. WALTER S. OTTO.