CORRESPONDENCE

Evening Post, Volume CXV, Issue 15, 19 January 1933, Page 8

CORRESPONDENCE

CENTRAL RESERVE BANK

REPLYTO MR. RUSHWORTH

(To the Editor.) Sir, —The opposition of Mr. Rushworth, M.P., to the centralising of our banking system, as reported in the Press, can only be accounted for.by his lamentable lack o£ knowjedge of the principles and functions of a Reserve Bank and the contents of the Bill now before Parliament. He has an advantage of,his farming friends when he parades the . Douglas Credit theory that-the solution of New Zealand's difficulties is to be found in keeping the monetary system in ratio with real wealth, as not I per cent, of them would understand what he meant by this. By such a statement we assume Mr. Rushworth contends that our trouble is due to an insufficiency 'of currency, and that while there is an over-abundance of goods, the lack of sufficient currency prevents the distribution of such goods. Let me ask the producers of these goods if at any time during the last four years they have ever been refused currency at the market value of the goods by any bank in New Zealand; if, on the presentation of the necessary shipping documents against a shipment of produce has the necessary ,currency ever been refused? Or,- in our local markets have ,we any evidence that it was the insufficiency of bank notes that prevented these goods being sold, or, if sold, was such a cause responsible for the price? If such a contention can be maintained, then let us have an explanation of the following figures dealing with the prices and the note circulation in, 1928—one of New Zealand's most prosperous years; and also the following years of the slump:— ■ . '. ■ . • Coin Prices of Circulation and bulWool. Butter, of notes, lion held. Bale. ■" Cwt. 31st Mar. £ s. d. £ - £ 1928 ..23 0 0 180s 6,376,668 7,867,459 1930 .. 817 6 145s 6,417,038 6,643,838 1932 .. 6, 5 0 90s 5,875,025 6,598,791 From these figures it will be seen that on 31st March, 1930, wool hadi fallen from £23 in 1928 to £8 17s 6d, and butter from 180s cwt to 1455, but the note circulation had increased by £130,000. It would be interesting to know, if the price level can be maintained by the increase of internal currency how this position should arise, and why the price of our primary products should fall so disastrously while the note circulation or currency requirements have increased? Coming to 31st March, 1932, the average price of wool was £6 5s and butter 90s, yet the note circulation had decreased, due, evidently, to /it not being required, by £542,000^- quite an infinitesimal fall compared with the disastrous fall in the price levels of wool and butter. Currency is put into operation, not by the issuing of bank notes, but by bills of exchange and by cheque book, which is used, more today than notes, arid the volume of such currency is contingent on the volume of goods to be exchanged, the banks acting merely as an agent in the transaction. Mr. Rushworth says it is the duty of the Government to administer the monetary system. ■ Governments, however,' are elected every three years, and the Government of to-day may not be the Government of to-morrow, and the monetary policy might differ with the change of .Government. One -can imagine the ■ chaos which would occur if Mr. Rushworth was Minister of Finance of New Zealand today and Mr. Holland was Minister of Finance next.year, and the Hon. W. Downie Stewart followed perhaps two or three years later. There could be no continuity of- the policy. The whole system would be governed by'the particular requirements of party polities. It is remarkable to find a responsible member of Parliament advocating such a disastrous system. • Mr. Rushworth also objects to the New Zealand pound being stabilised to sterling Why should he object to this, seeing that 88 per cent, of the productive wealth of New Zealand is exchanged for sterling? What "would, he have us to do? In 1928 our. currency was linked to sterling, and for-fifty years prior to this, and surely we can find no fault with conditions in 1928. Does Mr. Rushworth object to the New Zealander claiming his unit of value—the New Zealand-pound—to be equal to the unit of value of Great Britain? When we realise .that the^. farmers of New Zealand have purchased their land,' their houses, their stock, and all our national and private assets have been procured with these New Zealand pounds, it is strange to find a member of Parliament so unmindful of the national and private assets of the people of New Zealand as. to advocate that they be deflated to some artificial figure. There are two great barriers which interfere with the return of prosperity in all countries of the world:—

First, the interference of the free flow of trade by Customs tariff: restrictions. Second, the instability of the exchange between the currencies of the various countries trading one with another. The policy of the Central Reserve Bank will be to remove those restrictions from the financial, side and bring our pound note to' a parity with sterling, which to-' day, in spite of all that has occurred, is the premier currency of the world. The sneer at the Bank of England indulged in by many opponents of central banks, displays a lamentable ignorance of the work of this institution. Soap-box orators try to persuade the people that the Bank of England is some dangerous organisation, governed by unscrupulous millionaires seeking the destruction of all' trade and' industry and the enslavement of labour, forgetting the fact that their millions "are invested in the same trade and industry. Mr. Rushworth objects that the Bank of England has no relationship to the British Parliament. It is a very good thing for the British Parliament and for^-ttfe Bank of England, and more particularly for the people of England, that this is so. If the centralising of our banking system is in any way due to the advice given to the New Zealand Government J>y the Bank of England, then all right-thinking people in_ New Zealand will be glad to know this and insist upon it becoming the law of the land, their confidence being based on the conduct and policy of the Bank of England in Great Britain itself. During the last two years the strain placed on theßank of England to1 maintain Britain's position in the world of finance has been enormous, and it is to the credit of the Governor of the Bank and those associated with him that the Bank of England has come out with flying colours, and to-day sterling, although removed from old, is the premier currency of the world.—l am etc., • ' Auckland, 18th January.