CENTRAL RESERVE BANK

Press, Volume LXIX, Issue 20956, 9 September 1933, Page 12

CENTRAL RESERVE BANK

* Mr Coates's Proposals 1 Discussed EXTENT OF POLITICAL INFLUENCE i i "Mr Coates has made out a strong . and logical case for a central re- • serve bank for New Zealand—such ; a bank now appears to be both in- . evitable and necessary," said Mr , William Machin, discussing with a reporter of "The Press" yesterday . the memorandum issued by the ( Minister for Finance to explain the . Government's reserve bank proposals. "There is no answer to the dictum of Mr Coates that it is clearly the function of the State to lay down | by statute the monetary system to be adopted (especially when he provides that the administration of the monetary system should be free from political influence) except the answer that the State is incompetent to decide upon what is the proper monetary system," said Mr Machin. "This raises the whole question of government—the question whether we distrust and despise government so much, as many affect to do, that we are unwilling to entrust to it the large general issues which ultimately govern the Jives of all its nationals. What is the alternative? To leave these general issues to sections of the community which are specially interested, and which may jhavc a stronger allegiance to their l own shareholders, and may, because of tradition and convention, or inertia, or the duty to serve first some sectional interest, be biased against measures for the general good. Monetary Units. "Look at the measures which have been taken in the direction of currency depreciation in many countries, and the weakness of some of the criticisms against these necessary movements by bankers and financiers who ought to have known better, and in fact were suspected of knowing better while they advanced weak arguments for interested reasons. On our own New Zealand exchange movements responsible men have blamed the firemen for damaging the drawing-room carpet and ignored the main issues. The fact is that the world has reached a stage when each country must have a central governing financial organisation with the duty of determining the value of its monetary unit and defending it, and also the function of linking up with the central banking machinery of other countries. The proposed central reserve bank is designed for these purposes. It is becoming the accepted means for the accomplishment of these ends." Of course if Parliament was likely to alter its monetary policy from year to year in the same caoricious manner "as it had altered its policies on other matters to the dismay and injury of the business by which the Dominion lived, there would be trouble and loss to all, because it was a much more serious thing to interfere with the medium of exchange of all resources and services than merely with sections of business. The auestions therefore arose who would be the directors of the new central bank, how far would they be competent to advise the Government on this sunreme matter of money, and when they had advised the Government, how far it would listen to and act upon their advice? Formulation of Policy. The machinery of administration of the central bank was a simpler matter. It could easily be excellent. Well-trained and competent officers, skilled in the management of money, would be appointed. It was the policy to be formulated which was the main concern. There was a hint of the factors which might govern this policy in Mr Coates's memorandum, where he said: If at some future date Parliament laid it down that the New Zealand pound was to be worth only half the pound sterling, or so many pounds of wool or butter, the reserve bank would have no option but to work on any such basis." "The question is," continued Mr Machin, "would Parliament at the start lay down the broad general conditions which should always govern the value of the New Zealand pound, conditions which it would itself alwavs obey and work to, or would it reserve to itself the right to change its monetary policy as often as its members changed their shirts, or the colour of their ties? This is the doubt! The ablest minds in the world to-dav are agreeing to the monetary medium of exchange beinc adjustable to the value of the real things monev recrements. This would have been imoossible a few years ago. Opinion is moving verv swiftly. The ultimate danger is that the movement which is now beinff recognised as necessary and inevitable would be liable to be made too often or too easily under the sway of political considerations of a narrow or short-viewed character. Safeguard Necessary. "There should be some safeguard to this, especially in a country which is liable to take short cuts in order to get things done, but such safeguards are surely not impossible. "Mr Coates's proposals are large, courageous, and far-sighted. They are a necessary alternative to the unseemly struggle which has gone on for nearly two years between the Associated Banks and the Government, which has been, and is still, the reverse of helpful to the Dominion. "I hope the discussion of the proposals will be on large lines of principle and broad policy, and will consider the new needs of the future as paramount over smaller and irre- [ levant antecedent considerations and hostilities." AEROPLANE LANDS UPSIDE; ; DOWN. Recently in Australia a 'plane landed upside down through lack of foresight ' on the part of the pilot. Foresight is • a great thing. 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