THE DUTY OF BANKS

Evening Post, Volume CXV, Issue 144, 21 June 1933, Page 8

THE DUTY OF BANKS

(To the Editor.) Sir, —In your issue of the 17th inst. Mr. Gilbert R. Clark says that the banks have not fulfilled their duty to the community. He does not realise that a bank is simply an association o* shareholders, and that the duty of a bank as a .body corporate is to its shareholders. . He further says of tho banks that "when it comes to the issue and recall of the nation's credit they have proved themselves totally inadequate for the task." Mr. Clark should learn what a nation's credit is, , and then he will be ablo to understand tho danger there wtmld be if a bank or all the banks were to rely on "the nation's credit." In the first place the nation has no convertible property, and' its credit can he backed up only by the., extent of tho nation's power to tax its component inhabitants. That power is subject to the law of diminishing return, and when the people are no longer able. to. pay taxes, except, perhaps, by means of a paper currency ksued by the Government, where is the security of the nation's creditors? Mr. Clark repeats a statement made by Lord Tavistock to the effect ■ that "the real cause of poverty in the midst of abundance is to be found in the fact that tho existing financial system permits money to be treated as a commodity as well as a medium, of • exchange." The noble lord here'displays a . lamentable ignorance of economic principles. John Stuart Mill says in chapter XIX of, his work on Political Economy that ''money or the material of which it is composed is in Great"-Britain and in most other countries a foreign commodity." For the purposes of local exchange of goods or services for money, and for the settlement of local balances, a local currency may serve, and its real value may or may not be worth, the amount of its face value as expressed iii terms of the commodity adopted as the standard of comparison, but for the settlement of foreign balances a commodity which will be accepted by the foreigner . must be found.—l am, etc., ' v _. ■ A, de B. BRANDON.