STATE CONTROL

Evening Post, Volume CXVI, Issue 100, 25 October 1933, Page 4

STATE CONTROL

MONETARY SYSTEM

LABOUR OPPOSES BILL

The Leader.of the Opposition (Mr. M. J. Savage) said that there was not much wrong with the present banking system—it was tho control of the system that was wrong. If the proposed Reserve Bank was going to do one' quarter" of the things which the Minister stated it would, it would come into competition with the existing banks, because it was next to impossible for it to. say what class of security they should take and what rate of interest th'.ey should charge unless it did compete with them in some measure. The Minister said that the bank would have all the machinery required to carry out . Government policy, and yet he said ohat it would be free from political control. How could the Government be suro that the bank was running along the lines of Government policy, unless it had some control over the bank. "I am not saying that the Government should not be in control," said- Mr. Savage. "I am one of those who say that Parliament can be trusted with the job. The mess that the world "is in today has uo* been due to Parliament." POWER TO CONSUME. Mr. Savage said that the powers in the Bill were not as great as those which the Government had had since 1914, and for which it had had to pay an extortionate amount. Much had been made of tho fact that the bank would be able to make availablo cheaper credit, but was this what they needed? What was wrong with the monetary system was that not enough money was finding its way into the pockets of the people to enable them to buy. back the.goods which had been produced. If they reduced prices and credit and then reduced wages, they would be in the same position as they were now or evon worse. At tlio present time there was a banking institution in the Dominion which did at least 50 pet cent, of the banking business of the country, and the Government had had control "of that institution since the nineties. One wondered what use the Government had made of its powers over that bank. There was no doubt that the Government had greater power in this direction than it had under tho present Bill. The Minister had stated that '.the"'management" of tlio Central Bank would be concerned with the economic and financial position of the country, but at the same time it was not to take any instructions from the Government; This was an apparent coiT*radiction. . The bank would have to act on the advice of the Government, or how would it know tho position of - the Government? Was the bank going to be a financial dictatorship? Furthermore, there did not seem to be any power to prevent shareholders from living outside the Dominion. The Minister had Btated that the sharos would be spread among a large number' of people, but only 2 por ceiit. of them would worry about what was happening. It seemed that the BUI was simply an excuse for perpetuating the private control of the monetary system. Mr. H. Atmore (Independent, Nelson): That is tlio real objective. Mr. Savage: I agree with the Min-. ister. that Parliament can alter in tho future anything that is passed by tiic

present Parliaments Some day the prescntOpposition may be the Government, , and it will alter anything that is wrong. i (Laughter.) I hayo heard that empty laugh before, bu* I want to point i out that democracy is moving, tho people are moving, and I guarantee that if there was an election tomorrow the' Government would be movi ing. I challenge the Government to face up to that. OPPOSITION TO BILL. : Mr. Savage said that the existing ■ banks, with one exception, had agreed .to the Bill, but that exception did 50 per cent, of the banking business ,of the Dominion. Furthermore, that was the bank which was controlled by the Government. It. was a most curious situation. Perhaps tho Bank of New Zealand had been carrying 1 the Government for some time. The Minister had stated that without the Reserve Bank the banking system could not operate'fully,- but the only 1 way in which it coul'd be made to 1 operate fully was for the Stato to take control. Mr. Coates had stated that the bank would help to raise prices and prevent speculation, but they knew how successful the Federal Besorve Bank in tho United States had been in preventing speculation. These were questions that the Government should answer, because unless it stood up to the criticism of the Opposition, it would not convince the people. "The only way to utilise the ■ credit as it exists today," said Mr. Savage, "is to make it possible for the people to spend it. Putting something on paper will not do it. That is what we have been doing with our land laws. That will not alter the position. No one will need the • credit, unless tho people have the money by which they can buy those ! things which they have- made through tho expansion of credit." LONDON ASSETS. Mr. Savage said that there were sterling assets in London which would assist the bank. Very likely those ; credits, owing to the Government's ex- ' change policy, amounted to £10,000,000, but naturally one asked whether the bank would have power to issuo £10,000,000 in notes, What would the bank do with the notes? The Minister of Finance (the Kt. Hon. J. G. Coates): Give them to the Government? , Mr. Savage: That is interesting. What happens to the other private institutions at the same time? Mr. Coates: They will accept notes and retire Treasury bills. [ Mr. Savage: That will get us where ■we were before. Mr. Coates: We don't have fo pay ■ interest on the notes. Mr. Savage said that he was not

a member of the school which believed that there was any short cut to the millennium. Turning out money would not solve the economic problem. —the use of the printing press was not sufficient. It was necessary to put money into the hands of the people iu sufficient quantities to enable them to buy back the equivalent of their services. Unless this was done, they would not get out of their difficulties. He was opposed to currency being used as a form of taxation, as it was meant to bo a means of exchanging the various kinds of services. The job of the Commissioner of Taxes' was to collect what was equivalent to a levy. Under a Bill the Government was to find two^ thirds of the money required for the establishment of the ' bank and the shareholders one-third, yet the shareholders were to have the balance of power. This was the reverse of the position as it appertained to tho Bank of New Zealand. Although the legislation might be a means of endeavouring to frustrate tho Labour Party whou. it came into office, that party was intent on putting its policy into operation though the heavens fell. POWER NOT USED. Mr. Savage referred to the Acts already on the Statute Book for the expansion of credit. There had been several Acts or regulations put into force since the outbreak of the war for the expansion of credit, and under these- the Government had all the power it needed for any policy it might adopt without passing the present Bill, which seemed to be aimed at tying New Zealand to external prices to an oven greater extent. It was essential that the internal adjustments should be made irrespective of overseas fluctua; tions, and this policy was endorsed by such eminent authorities as Sir Basil Blackdtt, a director of the Bank of England. The Labour Party stood for the State control of the banking system. {This did not mean' that the banking system, would bo governed from tho Cabinet room, but Cabinet would lay down the policy and expect those in charge to carry it out. If they did not, they would be replaced by others who would. He would strenuously oppose the present Bill.