MORAL CREDITS

Evening Post, Volume CXI, Issue 129, 1 June 1926, Page 11

MORAL CREDITS

A BANKER WITH A HALO

WHEN DOES FOOD-STORAGE BECOME LOOT?

Under tho heading "Banker Proposes to Temper Banking With Public Interest, would holp 'Producer' at expense of 'Speculator' "—the May issue of ''The Banker" (official organ of the New Zealand Bank Officers' Guild) quotes "The Monetary Times,'" concerning a' banking reform proposed in tho Old Country by Mr. J. 1\ Darling, "who has for many years been, associated with practical banking." Mr. Darling, it. is .stated, ha,s "a scheme of banking reform designed to favour the real producer at the expense of the speculator. Ho thinks that the legitimate use of credit ia to .enable tho needs of man to be supplied, that there ought to be no restriction, for example, on the amount of credit that may be granted to farmers for the purpose of growing wheat a3 long as the credit is repaid, at latest, when the consumer buys the bread. As long as this is so, the credit will have resulted in an increased supply of food, with a tendency to reduce its price, and will h:.ve given employment to farmers, millers, bakers, and carriers. But as things are, sometimes a speculator intervenes and uses the credit to hold the wheat up—it may be the farmer himself, or the baker, or some outside op-erator—-and so tends to increase prices and give, according to Mr. Darling, less employment, though the employment, surely, must only be postponed, since the wheat or flour is going to be consumed some day. - , ■ '' The latter process ho conceives to be •opposed to the interestss of1, the community, and he accordingly considers that, for these' purposes, credit should be restricted. He thus proposes to introduce a moral element into ■' the problem of tho banker who is to lend money to customers not merely because he is satisfied that thoy will be able to repay it, but also after having, convinced himself that the money is to be used for purposes which are desir.able in the interests of the community.' • ; "It is a very interesting suggestion and bankers would undoubtedly, in extreme cases, exercise this sort of moral supervision. It it were known, for example, that a speculator was raising credits in order to be able to corner tho wheat market and starve tho community, into paying him a huge profit oil the operations, bankers would refuse to supply him' with funds, whatever rates he might offer them. But to apply this moral supervision to all the transactions of business and to divide credits as Mr. Darling proposes into those that are 'eligible' (for re-dis-count at a central bank), because they are for productive purposes, and those that are not so hall-marked, would be to introduce a serious complication into a business that is already surrounded by quite enough difficulties in. times like these. And the impossibility of providing that sanctified credits should not, before they were exhausted, be diverted to. illegitimate use without any intention on tho part of the original borrower, will be obvious to anyone who knows anything about tho way in which credit is passed on from one hand to another.

"Moreover, Mr. Darling begs a very big question when he assumes that everyone, who holds commodities up is a speculator who is injuring the community. If naturo would provide, us with a uniform supply of wheat throughout the year, so that there was always a steady" output of bread t'o'meot man's hujiger,; and if-the sairte regularity were »feserved by all tho natural, products that we consume, it might perhaps be possible to maintain this doctrine. But as it is, harvests come at certain seasons and we cannot sit down and.eat them as soon as they are ready for iis. Someone ha 3to do this job of holding up supplies, so that tho bakers may bo ■ kept busy all the year round; and it is most difficult to draw a line between those who are doing this most useful and legitimate business, and those who are merely seeking a speculative profit. And even when we have succeeded in drawing this line, there is a good deal to be said for the view that even the rank and unblushing speculator is a useful unit in the economic machine."