The Evening Star WEDNESDAY, JANUARY 6, 1932. AGAIN THE BANKS.
At present, and for some time past, the monthly reviews published by tho leading English banks have contained articles of exceptional interest on the almost innumerable aspects of the world financial crisis. This excellent example has been followed in Australia by the Bank of New South Wales, whoso bulletins have served to illuminate the local situation and constitute valuable adjuncts to the oversea banking literature, This week ‘ The Times ’ Service has cabled a summary of the Midland Bank’s latest pronouncement in favour of a heavy scaling down of war debts and reparations rather than a mere postponement. The conviction is exipressed that tho world’s linancial recovery can only come about by a rising price-level, otherwise there will bo a succession of national bankruptcies, followed by a reconstruction in which, as is invariably the case in ordinary trade crises, tho strong will profit at the expense of the weak, the cunning at the expense of the more simple, the unscrupulous at the expense of tho honourable, and in generdl tho sacrifices will be most inequitably borne. Why rising price-levels seem tho only factor that can avert disaster is that, in the final count, nations have no other realisable assets, ami if these are “ frozen ” through low price-levels (which is in general the case in respect of most commodities rather than tho socalled over-production) they have no
means of meeting their liabilities and have no option but to default. Wo in New Zealand bavo long realised that our salvation mainly lies in recovery of prices for our staple exports. It is for that reason that we are seeking for enlarged markets and therefore wider competition for our products. It is sincerely to be hoped that the trade negotiations with Canada on our behalf by Messrs Downie Stewart and Stevens will fructify, and there is the hope that later on at the Ottawa Empire Economic Conference decisions will be reached calculated to lift the blight off interEmpire trade. Reverting to the question of the banks, there seems now to be less disposition on the part of the public than there recently was to criticise the banks for repressing rather than fostering trade activity and enterprise. People of Socialistic inclination, particularly those prone to jump at conclusions, have inveighed against the powers of privately-owned banks, and have urged that our difficulties would have been far less acute, and would even now speedily evaporate, if privately-owned banks were relegated to the background, if not entirely abolished, and all banking were in the hands of the State. That might be so if all candidates for Parliament had to pass a stiff examination in at least two subjects—financial ability and probity. What, one may ask, would have happened to a State bank monopoly in New South Wales under the Lang Government? As a matter of fact, the Australian banks are now receiving unsolicited testimonials over the fact that, despite successive political shocks adding to the trials of business people, the commercial life of the cities remains virtually intact instead of there being wholesale bankruptcies. In the last available issue of the Sydney ‘ Mail ’ it is stated ; “ The sympathetic action of the trading banks, no doubt, has contributed to the maintenance of stability, and has been a steadying influence throughout. Without a sound banking system at their backs, merchants and manufacturers would have had their troubles multiplied a hundredfold. As it is, the banks have shaped their policy to meet the times, and have not hesitated to throw their influence behind any sound plan designed to assist the country towards recovery.” And in England Mr Arthur Kiddy, who has long and ably conducted the finance column of the ‘ Spectator,’ recently upheld staunchly the banking system of Britain. His article, however, provoked a letter to the editor of the * Spectator ’ from the Marquis of Tavistock, eldest son of the Duke of Bedford, which we reproduce here because it crystallises views we have repeatedly hoard in Dunedin. It reads: Sir, —I have read Mr Kiddy’s defence of the private' ownership of banks with interest, but without conviction. From his article one would imagine that the banks were solely occupied with the faithful custody of the money of the people. Not a word about the power of the great central banks to create new money out of nothing and to destroy money at will. The interests of bankers and of ordinary citizens are in direct conflict on the matter of the money supply, for ordinary citizens require money to be plentiful, but bankers, being dealers in money, and also moneylenders, like the commodity in which they deal to have the high value which scarcity secures. That is why the amount of a country’s money supply should be adjusted to the amount of its real wealth in goods by an administration responsible to the people, and should not be left in the hands of financiers who regard mainly the interests of their own class. The position in regard to war loan is nothmg else than a colossal scandal of exploitation. About 25 per cent, only of this huge burden was subscribed by private citizens out of savings. The remainder was created by the bankers without work or self-denial, by the simple process of writing the necessary figures in their ledgers. This money, which the banks created by a stroke of the peri, really belongs to the taxpayer, since it was created against the security of Britain as a going concern; but now the taxpayer is being crushed with financial burdens to pay interest to the bankers for putting money figures against the wealth ho himself has created 1
Space does not permit of close analysis of this viewpoint. But we feel constrained to ask whether all the pertinent facts are stated by Lord Tavistock. There must be a right and a wrong way of banking when necessity arises for the sudden and extensive creation of credits. Among the experts there is a consensus of opinion that tho British banks were never in a sounder position than to-day, whereas the wholesale defaults and closing down of banks in America have been recorded in the past few weeks on a scale unprecedented since the South Sea Bubble.
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Evening Star, Issue 20993, 6 January 1932, Page 6
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1,043The Evening Star WEDNESDAY, JANUARY 6, 1932. AGAIN THE BANKS. Evening Star, Issue 20993, 6 January 1932, Page 6
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