"REVOLUTIONARY"

Evening Post, Volume CXVI, Issue 106, 1 November 1933, Page 3

"REVOLUTIONARY"

THE RESERVE BANK

MR. WRIGMT'S VIEW

A STKONG ATTACK

"This Bill is one of the most revolutionary that has ever been before this House, and those who vote for it will be doing so with their eyes open, but they must accept the responsibility for their action.'' In these words, Mr. R. A. Wright (Government, Wellington Suburbs) concluded bis speech on the second reading of the Reserve Bank of New Zealand Bill in the House of Representatives yesterday. Mr. Wright said he hoped to show the House that central banking had not been a success everywhere. He defended the trading banks from the charge made by the Hou. A. D. MeLeod, that they had dictated the policy of the Government. The statements of the Minister of Finance regarding a Central Bank were altogether too optimistic. Did he not know that the Reserve Bank in America was largely responsible for the world-wide slump? The Federal Reserve Bank had seeu fhe economic storm- coming, but the Hoover party had held up the bank's policy until it was too late. Authorities would say that it .was the neglect of the Reserve Bank to take'timely action that had been responsible for much of the American depression. There was no doubt that in time the Reserve Bank would in times of stress become a party machine, and would be influenced by,the Government when elections were pending. When had the Government not been able to impose its currency policy on the country! When had the Government had a currency policy? If the Government had wished to impose its currency policy on the country, the trading banks would not have hindered it, but would have given every assistance. Great Britain's return to the gold standard had not been carried out at the instance of the Bank of England, but of the Government. However, the Home Government did not control the Bank of England. NO NEED TOR SEPARATE BANK. If it was necessary to establish a Central Bank, continued Mr. Wright, he wanted to know why the Bank of New Zealand could not have been turned intp a Reserve Bank. Hedid not see the necessity for establishing a separate institution. New Zealand was too small a country to warrant the establishment of the Central Bank, and it would- not be the goldmine some people imagined. It appeared to him that the Reserve Bank would have to carry the whole burden of the exchange manipulation, and he- suggested that that was the reason for its establishment. "This bank is being created for the purpose of taking this burden of the exchange in order that the Government and the Minister may stand from under when the crash comes," said Mr. Wright. Ho said that those who had opposed the exchange rate had been called "shellbacks," but it was better to be " shell-backs?' than "jellybacks." "A WILD GUESS." Mr. Wright said he did not see how the Central Bank was going to cheapen credit, as it was not going to be a trading bank. Mr. Coates 's estimate of the savings that would accrue from the Reserve Bank was a sanguine but wild guess. The claim that the bank would be free from political control was also incorrect. Referring to the directorate, Mr. Wright said that there were to be two farmers on the board, but everybody knew that the farmers were the simplest people in the world. "How often have farmers going Home to the Old Country been taken down by confidence tricksters?" asked Mr.. Wright amidst laughter. ■ 1 Mr. Wright said that the South African Reserve Bank had been coolly received by the people and the banks, and according to one authority, it had so far been a somewhat ineffective institution. Mr. Wright asked if the House would be surprised to know that the South African Reserve Bank, which had been referred to as an example, was in 1932 as nearly on the rocks as it was possible to be. It reminded him of the old fable of the lion and the mouse. The South African Reserve Bank was the lion and the two trading banks were the mice. When the lion got into difficulties the mice had to' come to its assistance. That, he contended, was the answer to all the talk they heard about the impossibility of a Reserve Bank getting into difficulties. A Reserve Bank could get into difficulties just as easily as a trading bank. The South African Reserve Bank lost £1,500,000 in one night, and its reserves were practically wiped out. INTO THE WILDERNESS. It was claimed that the Reserve Bank would assist in the rehabilitation of the country, but he failed to see1 how that could happen. A Reserve Bank could not increase the prices of commodities, but would have to act just as other banks acted. The real purpose pf the establishment of the bank was that the Government might place on its shoulders the cost of the manipulated exchange. Mr. Coates was the High Priest who was placing the burden on the head of the scapegoat. The only trouble was that he was not sending the scapegoat out into the wilderness "It is also a pity," said Mr. Wright, "that the Minister is not going out into the wilderness himself and staying there." (Laughter.) The Minister of Finance had stated that he was going to take the gold out of the. coffers of the bank at its book value and sell it at its market value. Ho instanced the case of one bank which since 1914 had imported gold to the value of £350,000, and the Government proposed to take it. "If I voted for that sort of thing," said Mr. Wright, "I would feel that I was in the company of Turpin, Ned Kelly, and other brigands." ■ Mr. Speaker:' I think I must check the hon. member; he is reflecting on other members. Mr. Wright: Well, I will say that if I voted for the proposal I would be ad mitting that I do not understand the rudiments of common honesty. Mr. Speaker again called Mr. Wright to order. Mr. Wright: I am expressing my own opinion. Perhaps I will be permitted to say that this proposal amounts to confiscation. The Minister of Finance says that the gold is, the property of the people, but it will take a lot to con vinco me of that.