MONETARY REFORM

Press, Volume LXXII, Issue 21908, 8 October 1936, Page 16

MONETARY REFORM

TO THE EDITOR f)F THE PRESS. Sir,—The Labour party claims that 1 by nationalising the Reserve Bank it has altered the money system and consequently fulfilled its election pledge for monetary reform. I have been endeavouring to grasp the incidence of this alteration. I have not a copy of the Reserve Bank Act or its amendment, but from memory I believe the amendment in-' creased the limit of the floating loan to the full amount of the estimated taxation in any one year. I believe also that no limit was placed on amounts to be advanced to the Government for capital construction, and that interest was fixed on all loans at 5 per cent. The result of this recent legislation will ultimately be that the trading banks that have honoured Government cheques will have a corresponding claim against the Reserve Bank instead of as formerly against the Government direct. The Rt. Hon. the Prime Minister, in answer to a question whether the Government would pay interest on loans, replied in effect, “What does it matter if the Government pays interest? It pays it to itself.” The point I wish you to answer is whether interest is payable by the Reserve Bank to the trading banks on their respective balances in the Reserve Bank’s books. If so, I think it makes all the difT 'rei., d in the world. Taxation will flow from the community to the G r rnment, from the Government to the Reserve Bank, and from the Reserve Bank to the trading banks. The system consequently will ->t have been altered in the least by the conversion of the Reserve Bank from a a semi-private to a State institution. Money is still issued to the Government as a debt subject to interest as formerly.—Yours, etc., ACCOUNTANT. October 5, 1936.