Central Banking

Press, Volume LXIX, Issue 20957, 11 September 1933, Page 10

Central Banking

We summarised during the week a pamphlet issued by the Minister for Finance to explain the theory and practice of central banking, with particular reference to the Government's Central Reserve Bank Bill. The pamphlet will be read with keen interest by all students of monetary problems, for besides bringing together in reasonable compass the latest information about central banking it deals suggestively with the wider problem of the relationship between banking and government. After the British political crisis of 1931 Professor Zimmern said very truly that one of the main problems before the country was that of " constitu- " tionalising " the banks. In New Zealand the recent dispute between the banks and the Government over the exchange rate has raised the same problem. It is no longer possible to regard the credit system in any country as self-adjusting. Nor is it possible to leave control of that system to bankers who are not answerable to the community. On the other hand, it is certainly undesirable that detailed control of the delicate machinery of finance should be left to inexpert politicians and varied to suit political needs. The orthodox central bank is an attempt, on the whole successful, to put financial policy under a control which is public without being political. On this point, it must be admitted, the pamphlet issued by Mr Coates is not entirely satisfactory. There are passages which suggest that the central bank to be set up in New Zealand will have its policy dictated in some detail by the Government. If this meaning was not intended, Mr Coates would do well to say so. The consideration is, however, of minor importance, since the pamphlet is not primarily a treatise for students but an attempt to tell the public simply and briefly what a central bank is and is not. It is too much to hope that it will circulate as widely as the literature of the Douglas credit movement or that it will fully counteract the mass of uninformed and hysterical criticism of the Government's bill. Truth always travels more slowly than catch-cries and superstitions. But there is consolation fn. the thought that mere noise

is not £i guide to the strength of any section of public opinion. If the pamphlet is read carefully by thoughtful and disinterested citizens, the Government need not be afraid to bring forward its Central Reserve Bank Bill in the coming session.