NEW ZEALAND INTERNAL LOAN

Press, Volume LXXIV, Issue 22592, 23 December 1938, Page 13

NEW ZEALAND INTERNAL LOAN

TO THE EDITOR Or THI PRESS Sir, —I should like to thank Mr Herring for his appreciative note in “The Press” to-day, and it is a pleasure to be able to write and say so. I mention this because any casual contribution of mine has been far from inspired by pleasure, just conviction and keyed often on a somewhat necessary —at least I thought so—note of vehemence not altogether perhaps even pleasant to read. The freedom with which you open your correspondence columns to views in opposition to those your paper stands for and sometimes expressed in terms almost bordering on abusiveness to yourself, establishes “The Press” as quite the fairest in the Dominion,

Those of us who support monetary reform earnestly look forward to the day when that star to which you have hitched your waggon on the front page, “Nihil utile quod non honestum” must eventually lead “The Press” into becoming its staunchest advocate. Then will New Zealand truly be on ’the way to becoming the happiest and most prosperous country (it has long miles to go yet) in the whole world, and Its people nearest to specifications, physically, mentally, and spiritually, designed by their Creator. Wishing you and also Mr Herring the compliments of the season.—Yours, etc., Y. T. SHAND. , December 22, 1938.

TO TBS EDITOR Of THE PKCSB. Sir,—lt is all very well for Mr H. E. Herring to pat Mr Y. T. Shand on the back, but what did Mr Herring do about it when he had the power? Power derived from the vote of people who put him into Parliament because be challenged the debt system is worth a great deal more than that of a letter Writer. It is actual, not potential. He became a servant of a party instead of the servant of the people who put him there. I had the duty of representing •certain branch from his electorate at the party conference, but even there be had not sufficient backbone to fight ■With me for the vindication of a democratic principle within the party, wiich professes to be democratic. Mr Herring lost his power truly to represent his constituents when he consented to obey the party whip. His constituents lose their power when they allow him to do so. As members the party they lose their power yben they allow the conference to brush their remits aside and ride roughshod over legitimate discussion petfoods of decision. Mr Herring pst his seat in the voting at Southonuge, so perhaps the lesson will not Jr® tost on him if ever again he gets ™ opportunity to represent or supr»vft. the views of those who know „~at they want. In the meantime his Bjjccessor has the opportunity of profit- “*• by the same lesson.—Yours, etc., ~ W. B. BRAY. December 22. 1938.

FO THE EDITOR OF THE PRESS Sfcv—Critics of the present banking stern have in recent years been given of space in the press of Dominion to urge remedies for mw°s? lc ffl® that have afflicted - not New Zealand but the rest of the ' an( f they have got into the r? Dlt of repeating certain stock BJfoasos, like: “Bankers lend money Sh.r u have not got.” or alternatively gr .banks can “create money” out of ■FUta* Horn Ms

Horace E. Herring, of Wellington, in a letter in your issue of to-day’s date, uses the former phrase and then goes on to describe this operation as a "swindle" that is daily and hourly .perpetrated at the expense of the community. . , Not only is his statement a libel on the trading banks of New Zealand, but it is also a palpable contradiction in terms. While it is true that the banks lend to their customers, it is a sheer physical impossibility for them to lend something they have not got, just as impossible in fact as for a butcher to deliver a pound of sausages not yet made.

In New Zealand to-day the only bank legally entitled to issue money is the Reserve Bank, and it would certainly be a “swindle” if the trading banks counterfeited Reserve Bank notes. Let us examine what actually takes place when a customer obtains a loan from one of the trading banks by way of overdraft. He pledges sufficient security with the bank, and the bank promises to honour or cash his cheques from time to time to the extent of the limit agreed upon. The customer in return promises to pay some time in the future. The essence of the transaction is an exchange of the bank’s promise for the customer’s promise, and as every sixth standard schoolboy knows, a promise exchanged for a promise constitutes a binding contract, enforceable at law. To describe such an operation as a swindle perpetrated at the expense of the community is to use language that would disgrace even a soap-box orator. That the bank in converting the customer’s illiquid security into a liquid deposit, subject to transfer by cheque, has rendered a -service will not be denied; and surely it will not be denied that the bank is entitled to be remunerated for its service. The reasonableness of the amount of the bank's charge may be open to question; but that is another matter.

May I t in conclusion, be permitted to say that a “liquid deposit” is not money in New Zealand. It may be “bank” money, “synthetic” money, “credit” money, or any other adjectival money; but monetary reformers would do well to learn that the only legal tender money, except for trifling coinage amounts, is the money issued in notes of various denominations by the Reserve Bank.—Yours, etc., W.G.M. December 2, 1938