RESERVE BANK LAW

Evening Post, Volume CXVI, Issue 135, 5 December 1933, Page 8

RESERVE BANK LAW

(To the Editor.) Sir,—The Reserve Bank is now law: one consequence is that the shareholders in the banks now carrying on business here, and which have for some years been inhibited from the export of gold held in excess of that required for the support of banknotes issued by them, are now penalised by the confiscation of the difference j between the nominal value of their gold and the comparative value of the depreciated local currency, such devaluation having arisen largely, if not entirely, from the action of the Government in arbitrarily "pegging" the rate of exchange at 25 per centum on remittances from. New Zealand to England.' • ',;•■ It is undoubtedly the case that' a very large majority'of the shareholders in the banks are not resident in the Dominion, and are not otherwise interested in the Dominion, and it is not unreasonable to presume that among those shareholders there will bo found many who take an intimate part in the World adjustment of finance in the London money: market. What then will ba the opinion. expressed when New Zealand seeks to borrow money in England? It will b,e said ; that NeW Zealand has not fulfilled her contracts— and not merely that^-it will also bo said that New Zealand has brpkeh"' her tracts. As aiurther instance the unconscionable tone in New Zealand, it mayvbe recalled, that a New Zealand local body endeavoured to set aside an elementary proposition of "Private International Law" and claimed to bo able to discharge debts which were made payable in London —not by paying them by Jlio>delivery of Bank of England notes (which is the only way by which a debt payable in England can be satisfied)—but by paying a much smaller sum which represented in New Zealand currency the nominal amount of the debt, but which when it should coma to-be tendered to the creditor,in London represented only three-fourths'of the debt. Assuming that the Reserve Bank starts business under the Act as it now stands, it is to issue. banknotes and' such banknotes are mado legal tender, but the Act does not assign any particular security to such banknotes. The Act certainly provides that it shall be the duty_ of the Bank at all times to maintain a minimum reserve of not less than 25 per centum of the aggregate amount of its notes in. circulation and other deniand liabilities,; but .at the request in writing of the board the Minister of Finance may "suspend the requirements of the last preceding section as to tho maintenance by the bank of a minimum reserve."—l-am, etc., ' >■.*■ - •.■;.' '■• ■'■'■^. "■'■. ' • B.JV