Banking Policy.

Press, Volume LXV, Issue 19613, 8 May 1929, Page 10

Banking Policy.

The Banking Supplement of the Financial Timet, perhaps the most widely circulated publication of its kind in the world, contains two fullpage articles which will especially interest those people in New Zealand who are crying out for cheaper money. The first is a review of the Dominion's " genera) economic situation" by Mr Pember Reeves, and the second a spirited defence of the Bank of England by Mr Harold Co*. Mr Reeves's article is also a " defence " when he is dealing with general banking policy. If he had been asked to say what pleases him most as a citizen, or even as a politician, in the general economic situation he would probably have said thfi amount (well over fifty millions sterling) standing to the credit of Savings Bank depositors; but what pleases him most as a banker is, he says, the fact that experience has " justified the policy " of the banks in limiting imports and encouraging deposits two years ago.

Experience has shown more than once that In a producing country like New Zealand a sharp fall in the value of primary exports is not followed as soon aa It ought to be by a reduction la either the price or volume of Imports. The result is that merchants and retailers become overloaded a»d importers become embarrassed at the very time when producers for export see their profits eot down. The only thing for the banks to do i» to take the unpopular step of patting up the advance rate, and this step the New Zealand banks took .a'fter considerable hesitation.

Mr Reeves admits that the banks " took "their time" about reducing the rate •gain, bat Mr Harold Cox makes no admissions of any kind in defending the Bank of England. The business of a bank is, be says, to lend. If it fails to lend it fails to live, and if therefore it does not lend as freely as the public think it should, the explanation must be that it does not think it has adequate security. The Bank of England is of eourse a national as well as a commercial institution —indeed an international institution—and what particularly concerns Mr Cox is the fact that at least half of its critics want to see it nationally controlled. And by " nationally" we of course mean 44 politically." Mr Cox quotes these two sentences from a Report on Currency, Banking, and Credit issued by the Labour Party some months ago : (1) Control of the Bank of England ought to be vested in a public corpora-

tioii containing representatives of the Treasury, of the Board of Trade, of Industry, Labour, and the Co-operative Movement. . (2) Differential financial treatment should be meted out to forms of P r ?" ductive enterprise according as their uses are of social advantage or the reverse. This naturally worries him, as it would worry all intelligent people if they thought about it, and thought also that the Labour Party might bring it to pass. It is of course extremely unlikely that the Bank of England will ever be taken out of the hands of bankera and placed in those of politicians. If this did happen it would be an international calamity, but we can imagine its happening only it - we can also belie\e in an old-time revolution in England, with barricades in the street and civil avsu.