National Credit

Dominion, Volume 26, Issue 101, 23 January 1933, Page 11

National Credit

gj r> —\[r. Taylor questions, as an “amazing statement,” our opinion -that “no one has taken the control of public credit from the public. It is still under the control and at the service of the people who own it.” The basis of his objection appears to be that the community, credit is under control of the banks —if it is so, who puts it there? The people who own it surely. Mr. Taylor proceeds to point out that the banks, for a consideration, lay down the conditions under which that credit inav be given a monetary value and that they have the sole right to issue money tickets. The banks’ authority for laying down these conditions is surely based upon the consent of the owners ol the funds in their hands upon which tlie credits are granted. Government statutes —or, in other words, powers granted by the community—have given them the rigbi to issue notes. . To' remedy’ this state ot affairs Mr. Taylor apparently advocates that the Government, presumably through the agency of a State Bank, should take over the manipulation of the community credit. This suggestion of a. State Bankmay be sound from the point of view that the profits would go to the Government instead of to the shareholders (who are mostly small investors), but we cannot see how it would in any way make, credits easier or cheaper, or otherwise alter the existing banking practice. No State bank has done so yet, nor would one in New Zealand be likely to do so. Mr. Taylor proceeds to say that "one of the fundamental causes of the present paradoxical absurdity of a world starving in the midst of plenty has been brought about by a shortage of paper tickets.” We venture to criticise this on the ground that there is nowhere, as far as we are aware, any shortage ot currency (coin or notes),'because so long as cheques are available trade transactions can be carried on. The real trouble is that there is a shortage of security, on which credits can be issued, to enable cheques to be drawn. The issue of more notes would not help anyone as thev would only go back into the banks —State, or private—even if used, ami unless these notes, or cheques drawn against credits, are based on solid wealth, inflation would result. . . In making the above criticism to Mr. Taylor’s letter we wish to make it clear that we are not arguing against a State Bank, but merely pointing out that such an institution would not give us any more credit-issuing powers than we have now, nor would it make those credits any easier or cheaper unless it transgressed, sound banking practice. If it did that the community would not entrust it with their money. Nor are we discussing currency reform or the Central Ban!, proposal—we are merely pointing out to those who think the reforms, advocated will make better use of our national credit that we have, already worked upon that national credit to its utmost capacity. We are, WELFARE LEAGUE Wellington, January 20.