CORRESPONDENTS' VIEWS

Auckland Star, Volume LXXVI, Issue 163, 12 July 1945, Page 4

CORRESPONDENTS' VIEWS

MONEY DANGERS To the Editor Although as a rule I ignore statements made by ■writers who hide their identity under a pseudonym, your correspondent "Money Crank''' has so obviously disregarded the salient points in my recent report and introduced a number of side issues which can serve only to confuse the real issue, that I feel some explanation is called for. In the first place I would like to assure the writer that I have no quarrel with trading banks lending money and charging interest on money which they actually possess, in the same way as savings banks lend money i and charge interest. But Ido object !to the present system of trading I banks creating or manufacturing money at no cost to themselves and lending it at interest to borrowers This is specially so when the State happens to be the borrower. In my report I quoted a statement made by the general manager of the Bank of New Zealand to the effect that during the war years the New Zealand trading banks created just on £20,000,000 new credit money, which they invested in Government war loans and on which the people of New Zealand are paying interest My contention is that if this additional credit money was necessary for war purposes it should have been created by the Reserve Bank, free of interest at its source, thus effecting a substantial saving of interest (and taxation) to the people as a whole. Surely it must be obvious that if a private money-issuing system is permitted to operate, without any obligation to maintain a stable internal price level all attempts made by the Stabilisation Committee to fix prices and wages become futile and farcical The remedy is quite clear and has been stressed by numerous banking and currency authorities; the creation and issuance of all new credit money should be the prerogative and responsibility of Government, and the control of credit and currency should pass from private institutions into the hands of a statutory authority representative of the people as a whole. The guiding principle of this control should be the stability of the internal price level. This is all that is needed to make the people's money a stable and honest measure of value from year to year. May I suggest to your correspondent that he again read the report. There were no "vague generalities," but a clear-cut statement of facts and a practical solution for anyone with an open and receptive mind to understand.

H. J. KELLIHER.