CORRESPONDENCE

Evening Post, Volume CXVI, Issue 110, 6 November 1933, Page 6

CORRESPONDENCE

"WHO OWNS THE COLD?"

(To tho Editor.)

Sir, —Eveii had I f not received so much kindness from people in various parts of the Dominion, nor had I such a high opinion of New Zealand and its future, coui> tesy would compel that I took no sides in this matter, but in today's ."Evening Post" Mr. J. Hislop, of Auckland, makes statements regarding the Bank oLEngland gold vhjch give the impression,''that the Bank handed over the gold from its note reserve'at. the ,old par value, and'that was the end of business. If tli'e people ■of New Zealand think that is ali,.and take action iv that belief they .willj .be wrong, as tho transaction is by no means complete on that basis; as-between, the Bank of England and the Imperial Government, and probably won't be finalised until Great Britain goes back to gold Jit some future date and at some gold content to the British sovereign less than 113 grains' as the British Parliament may decide. It ought never to be forgotten that the greatest of the Empire's Reserve-Banks, which; we know as the Bank of England, is entirely a. privately-owned company, inasmuch as it is a corporation trading under a charter, which charter is renewable from time to time on terms mutually agreed between the Bank and the Government of the time. Every penny of the capital is owned by private citizeijß, while the Governor, Deputy Governor, and direc-, tors are elected by the proprietors. The Government' has no voice in the selection of these officials, and this is very much in accord with the present feeling in British commercial banking circles, even although from tinie to time the Bank of England has to-do things which are apt to reduce the profits of the trading banks. At intervajs, various" Chancellors of the' Exchequer have risen in the House of Commons and have categorically; stated that while there is the closest possible co-operation between the Treasury and Threadneedle Street, the responsibility of the note issue and the. gold'reserve is entirely that of the Bank. "'■'.-■ .

One would not wish to depress unduly the people of New Zealand, • but it is a fact that it has taken Britain well over 200 years to evolve the Reserve Banking system of Britain, which is such a magnificently efficient weapon in the economic warfare which has been raging so fiercely during the past ten years or so. It has been possible only by reason of the wonderful reservoir of banking talent and experience in Britain and the skill, energy,, and eelf-saerificing spirit of. a long succession of Governors and other officials, who in times of crisis appear to put the interests of the nation before those of dividends, without in any way risking the soundness of the Bank and all that soundness stands ior. ■ The banking system of Britain has practically no written constitution, and as it functions as a living organism in times of great change, this has proved an advantage, and any temporary disadvantages which may have arisen from the lack, of' a rigid constitution have been readily overcome through having good men both at the Bank and .it tho Treasury, whoso guiding principle has been the .good of the country *

■• When the gold had to be sent to America in December, 1931, it was because nothing else could be done. t Negotiations had been proceeding with President Hoover which looked like being successful, and the Treasury had not accumulated either gold or dollar securities. A day or two before tlie due date President Hoover had to let us down, and gold had to be taken from the note reserve and earmarked for Washington. Gold could not hayei been ; got in the time any other way, and the Bank had to lend the gold to the Government. It is not easy to follow these matters closely even in London, but it must be practically impossible' from this distance, particularly as the Bank treats the Government in the matter of business courtesy simply as the largest ,of its" customers, and declines to discuss with or disclose to the public any of its transactions. If the Prime Minister, First Lord of the Treasury, or other responsible Minister likes to make a statement in ' the House well and.' good, but you will very properly get no information from the Bank. The gold has been replaced, and'now the Bank also acts as Government agents' in equalising the' sterling exchange, but the loss or profit will be for account of the State. It will also be.settled when the war debts question; is squared up. Even in the at present unlikely event of the British Parliament wanting to take over the British bank-note reserve at the old parity, it is at least doubtful if the Courts would uphold them, as every British citizen has the right to. petition his Majesty through tho High Court, but such matters are unquestionably best settled without the publicity of long-drawn-out legal proceedings, which always damage a country's credit and scare investors, who in their' millions, either, as direct investors or as shareholders and policyholders in i banks, insurance companies, and the like, are people ready to take fright, not quickly impressed by fine legal points, but often •willing to' fight for what1 they consider their rights, either on their own account or through powerful and energetic organisations, which exist for the purposes. In such cases everybody loses. •' • As to the other instances quoted hf Mr Hislop,' I am away from my notes, and cannot say, but it is the British rystem which is in question and not Continental, which are not; the same at all, being'to a lnrgo extent part- of the tail of tiie comet of French finance, where the depreciation of currency since the war has been enormous. • . I wish New Zealand every success in her efforts to find a right solution of this matter.-lam'cte., b , November i.