A STATE BANK.

Evening Star, Issue 13090, 24 October 1908, Page 8

A STATE BANK.

TO THE EDITOR. Sir, —As Mr Douglas and Mir Munro are pledged to a State Bank, I crave space to show the advantages of such an institution as a means of getting New Zealand out of debt and preventing this land from getting further into debt. We have a Public Debt of about £66,000,000, and pay nearly £3,000,000 in interest each year. There is no reason why we should have a Public Debt. There exists no reason why we should borrow money at all, as I will prove. Ihe credit of the Government of Now Zealand is worth more than all the banking institutions in Now Zealand. If the credit of a bank can bo used for promoting enterprise and earning dividends, why cannot Die Government employ their own credit directly? Why cannot Die ■credit of the country be utilised to carry on its developmental or other works, instead of having to borrow the credit of a bank and pay interest charges? When the State borrows money to carry on railway works, to resume land, or lend money to farmers, they have to pay twice the amount they would have to pay if the State had not incurred interest charges through borrowing other people’s credit. Now, when they acquire a loan the Government issue their credit in the form of bonds, and the bank opens a credit acoooitit in favor of the Government. It can therefore be seen that the transaction is nothing more than an exchange of credit; and as the credit of any Government is greater than that of any bank, for the simple reason there is more wealth behind the Government than there is behind a bank, it follows that the Government are exchanging credit of high value for that of a lower value, and actually paying from 3 to 4 per cent, in exchange. I was in Queensland when the banking crisis occurred in 1893. The Government of Queensland had their borrowed money deposited in the Queensland National Bank. When the bank closed, what position were the Government in? They, in order to save their own borrowed money and reconstruct the bank, had to issue Treasury notes and pledge the credit of Die community. Thus w© find that a private bank is built on such a rotten foundation that to save the savings of the people invested in such concerns the Government must invariably tome to the assistance of the bank. The banks are built on such an insecure foundation that they cannot reconstruct without the aid of the Government. Instead of borrowing money, the Government, or even a municipality, should issue notes on the value of the industry to be created. The notes would be negotiable. The credit which is eagerly purchased by a banker would surely not be refused by a storekeeper or a laborer. And as the notes of a bank are negotiable, those issued by the State Bank would be more so, as there would he no danger of over-issue, because in a State Bank the face value of the notes issued would not be allowed to exceed the value of the wealth created. To-day, if we borrow half a million at 4 per cent. ..•redeemable at the' end of twenty-five years, we pay half a million in interest at the end of the twenty-five yeans, and still owe. or, at least, our children owe, the half-million. But if the State issued the notes, Dm amount that [pays interest would repay the notes. Thus each year a number would be withdrawn from circulation, mid at the end of twenty-five years all notes would be repaid, and the industry would belong to the people. Thus posterity, instead of paying a debt, would have an industry clear of debt. Against this system the Hon. Mr Millar told us of the paper money issued in France and America. A. Kiteon, the author of ‘The Money Problem’ and ‘lndustrial Depression: Its, Cause and Cure,’ in pointing out that the notes in America and Prance rep resented' so much wealth

chase material *iKi-' to * pay' J i6r »mTicee which left nothing but poverty pod disaster in their track, add the' paper bed tie hading but the credit aad honecty of thb Government and the abilitybf the people to pay heavy taxes. . . - Whilst the French assignats ami American paper currendes were used in destroying' industries, State Bank notes would, oh the contrary, be employed in creating new and - developing existing ones. '. . . As fast as these notes ore issued new .wealth is created fully equivalent to their value." As the State Bank will do much to bring New Zealand out of pawn, and make the children of the future free of debt, and \yipe out the interest bill, every elector who stands for solvency should support Messrs Douglas and Mnnro.—l am, etc., J- E. MacMakus. October 24.