CREDIT CONTROL

Evening Post, Volume CX, Issue 49, 26 August 1930, Page 12

CREDIT CONTROL

THE BANKER'S TASK

"TO PICK WiNNERS"

''Evening Post," 2(ith August.

' Credit is the principal subject dealt with ja, a circular issued by the Bank of New South' Wales. It is shown that since credit in. prevailing circumstances is under - consideration the discussion naturally bears upon the possibilities of inflation, and expansion of credit, irrespective of soundness in-banking. A problem is stated that the difficulty m which the world of trade now finds itself, encumbered with goods but bereft of markets, must lie in arranging terms and media of exchange. "In such a task a small country must await the initiative of the world's main monetary centres. There are, however, many impatient spirits in this as in every country who fail to see how there can be any difficulty in finding the money. 'Why not print as much money as is needed to set everyone at work?' they ask. Others are vaguely aware that the printing of notes by one nation beyong its neighbours has time and time again destroyed the purchasing power of a local money. -The surest way to bring • revolution upon a community using monetary contracts is to debase the currency. All but the wildest hesitate', to run the risk of such doings •within our Commonwealth. NATIONAL-CONTROL. "But many, proclaiming their superiority to .mere 'currency cranks,' call for the 'national control of finance and credit.' More explicitly they claim that the power tef creating credit should be taken away ifrom the banks and used by the Commonwealth in the interests of the people as a jn-hole. . There is need for clearer thought «n this matter. It is plain to all who lead tie utterances of the *credit-national-isers'that they.contemplate, not the abolilitson of banking, but its monopolisation by ■jft single Government bank. •"Tie interests of the people' may seem So the Wndhearted to imply for every man teie boon of an overdraft at a low rate of anterest with- which, to build him a house, Jtxteod his farm, or re-equip his little workshop with np-to-date planw ' Such a policy jnight be as inevitable1 in a single Government :bank as < has' been the gradual extension of protection, wage fixation, and Marketing controls to every Australian industry but one. There is no logical halting place for a benevolent democratic Goy«3iment. In the one and only bank it Jwould have the, means of universal subsidisation ready to its hand. It could create jiredits for all. DISCRIMINATION. "Indiscriminate lending would.. increase Jihe funds each borower had to spend and jfhp price of every purchase. Thus costs jwould rise and liberal advances would lead ■tetraight to unprofitable conditions of production. There is no escape from the Meed'of discrimination in the grant of credit by a bank. But does Government Operation make for discrimination? Government billets do not necessarily endow a group, of ■ men with wisdom to pick out those who, under contract of future payjnent will prove best able to turn limited tesources to good account. . That is the banker's task—to pick win- : ners in the use of our resources so that : they shall afford an increasing flow of ' goods arid services that the world at : large will buy. When all the world's markets, are depressed, the need of : shrewd judgment in this choice of venturers is greater than ever.

'■New men selected by our political leaders are certain to be deprived of a free hand in the attainment and exercise of Buch judgment. The chief officers of a' giant Government monopoly, however they were chosen in the first inetance, : must be diverted from judging .would-be venturers with a single eye to Stability and sound progress. I'or they must.' accord, at every turn, favours to certain groups or individuals," The opinion is expressed that "Australia is under up nfieessaity to entrnst her private finance to those who .have wrought fcavoc with her public estate."