As Mr. Walter S. Otto knows perfectly well, what I called upon Mr. Kelliher to prove was, not that bank cheques cost the banks practically nothing, for that is obvious enough, but that the substance of the advances made costs the banks nothing. I showed, and Mr. Otto makes no attempt to prove me wrong, that the borrower from a trading bank obtains goods of the full value of his loan, precisely as he would if borrowing from a savings bank or any other lender. He owes only for those goods; he owes nothing, and pays nothing in interest for the cheques he draws. "When a commodity that costs nothing is supplied for nothing no grievance exists. I also showed that when the cheques that bring advances into existence are deposited the banks become liable to their depositors for the amount of the advances precisely as savings banks are. The claim, plainly made by Mr. Kelliher, that borrowers from trading banks obtain only what ought to cost nothing, and would cost nothing under State banking, is simply nonsense. They obtain, to the full value of their loans, the produce of human labour, produce that cannot be obtained for nothing without robbery. Manurewa. J. JOHNSTONE. My statement is clear and definite. "When a bank invests in a Government loan or advances money to invest in a Government loan, every penny has to be handed over to the Reserve Bank in the equivalent of hard cash." It is absurd for Mr. Otto to say that in 19 out of 20 cases no hard cash changed hands. In every single instance of a Government loan, liquid assets must be handed over and each Government loan locks up liquid assets of the trading banks. This is the whole meaning of Reserve Bank control. The only power the State does not, have is that of what individuals are to get credit, and Mr. Otto will agree that the State should never (have this power. If the increase in the volume of money was due to the actions of the trading banks, then the advances would be greater, whereas they are not. As a result of the Government obtaining advances from the Reserve Bank
the volume of money has been increased. If a credit authority is set' up it must be either subject to the controlling direction of the Government or it must be above that control, and surely we could not contemplate placing in a few men a power above that of the Government. To-day all the machinery exists whereby the Government can regulate the volume of credit and currency on the basis of maintaining price-level. The whole banking issue now turns on one point, namely, who is going to decide what persons shall get overdrafts? The Government must have this power in order to enforce discipline and destroy democratic Government. J. H. LUCAS.
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MONEY DANGERS, Auckland Star, Volume LXXVI, Issue 172, 23 July 1945
MONEY DANGERS Auckland Star, Volume LXXVI, Issue 172, 23 July 1945
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