National Credit

Dominion, Volume 26, Issue 105, 27 January 1933, Page 11

National Credit

Sir, —Since the NJS. Welfare League has not answered the questions I asked, I gather that it has'nd special brief for the present system of private control of finance, and is actuated by that caution which checks us from exchanging “the Devil we know for the Devil we don’t.’’ Yet it is this very fear of trying out new ideas which is keeping the world in its present mess. In spite of the imposing bluff put up by the champions of the present system, it has so hopelessly broken down that the leading banker iu England frankly confesses that he sees no remedy. . . . The Welfare League’s statement that we have exhausted the community credit means that we have filled our warehouses and shops, but we have not distributed the necessary purchasing power for the goods to be consumed. No economic knowledge is required to see that the fatal flaw lies in the present financial system. The whole industrial system has been built up upon a vast inverted pyramid of credit, this credit being the sole monopoly of the banks. In reality notes and other currency are of minor importance, being only the small change of industry. At least 97 per cent, of financial transactions are made by means of credit instruments. Sound banking practice enables them to “lend” ten times as much money as they actually possess. But though this money is created by the stroke of a pen, the borrower pays the full rate of interest on it. If the League disputes this statement, can they explain how the proposed Central Bank could possibly operate on the scale intended, ou a paltry half million put in by the shareholders. In 1929 the banks advanced £49 million, and received in deposits £57 millions, though there was only £7 millions of actual money in the country. In addition reserve profits amounted to £24 millions, and paid up capital to just on £29 millions. Now what would happen if all those who had deposits on current account all demanded their money? Either the printing press would be working overtime making more notes, or the Government would have to step in and place the country’s credit at the disposal of tin 1 banks. The whole of the banking system is founded upon bluff, yet we are being asked to-day to tamely allow ourselves to be delivered lock, stock and barrel, to a pri-vately-owned bank with a palty capital of half a million. To enable that bank to function the State will have to jeopardise the people's own real wealth, while paying through the nose for all “loans” which it may require itself. . . . While we.hold the uncompromising view that the private control of finance is wrong in principle, at least we will admit that the present system of competition between a number of separate banks is infinitely to be preferred to giving the sole monopoly to one. —I am. etc.. N. V. TAYLOR. Hon. secretary, Wellington Douglas Credit Assn. Wellington, January 24.