QUARTERLY BANKING RETURNS

Press, Volume LXX, Issue 21147, 24 April 1934, Page 7

QUARTERLY BANKING RETURNS

TO THE EDITOR 01:' TIIK J'HE.s*. Sir,—lt would be interesting to know who is rcspnosible for the method of presenting the quarterly bankim; j returns. I have previously pointed out that the true position is obscured because the item "Government securities held by the banks"' is not included tinder the heading of advances. It is actually an advance by the banks to the Government and to say that deposits are up while advances are down is to mislead the public. Under the Banks Indemnity Act the Government has tfone deeper into debt to buy the surplus London funds, the net result being that the Government has taken over a portion of the farmers' debts. The increase of £14.202,471 in the Government's debt is represented by a decrease of J. 7,623.405 in private debts, and an increase of £8,443.1(>3 in deposits. A true comparison of the position is as follows: —

This bears out the assumption that increased advances lead to increased deposits. The greater increase of deposits compared to advances in thr above is accounted for by several factors. Cheques in transit at the balance date appear on the liability side only—as deposits. London balances not yet sold to the Government for Treasury bills increase the deposits but not the advances. < Professor Tocker would put the cart before the horse when he talks of the banks selling every additional £ of resources. The banks do not sell the £'s in the deposits. They buy the Treasury bills by writing the £'s in their books as a credit. If the credit is set against a debit, there is no alteration in the total advance, but when the credit is added to a credit it increases the deposits. The banks can no more lend their deposits than they can fly. The exchange rale was rigged so as to relieve the farmer of the burden of debt, which it has done by putting the debt on the whole community, and now Professor Tocker complains that the arrangement' has restricted advances to the public and retarded recovery. So now the way out is to gel; the farmers into debt again! The truth is that the economists, and others, who pushed the Government into raising the exchange artificially are mere theorists who have failed to dig deep enough for a foundation on v/hich to build their half-baked theories. As often as it suits them they can shift their ground, trusting to the shortness of the public memory that they will not be found out. It is now suggested that the Central Bank will solve all the difficulties. It seems as if we will have to explore many blind alleys while our present leaders search for a way out of the maze. The fundamental truth which has so far been ignored is that the people of this country are unable to purchase the whole of the goods they produce. Granted that it would be physically impossible to use all the meat, butter, and wool, the people must have the means of buying it if they are to buy the goods which can be exchanged for the surplus. The twenty millions of London funds represent goods which we arc entitled to draw from Britain, but they are not brought here because the people cannot buy them. Tariffs and Quotas and juggling with exchange merely move the pressure from one country to another, from one group to another. The farmers here are in one camp opposing the manufacturers and making overtures to the manufacturers of Britain, who arc opposing the British farmers, who in their turn look to the New Zealand manufacturers for political support. Can there be anything more ridiculous than this factional fighting while the Government gets readv to make a present of the London funds to the Central Bank? Nothing can now stop the deal which will bring lasting ignominy on the heads of the responsible Ministers. — Yours, etc., _ W. B. BRAY. April 21, 1934.

Liabilities Assets i Deposits and (Advances and notes in Government circulation). .securities'. £ £ 1933 .. 58.676,091 "17,750,910 1934 .. 67.408,064 65.028,903 Increase 8,731,973 7,277,993