STATE BANKING CONTROL.

Evening Star, Issue 25469, 27 April 1945, Page 7

STATE BANKING CONTROL.

TO THE EDITOK. Sir,—lll my.last letter I pointed out that Mr Nash considered that it was not necessary to take over the Bank of iSew Zealand, and that he considered [ that the main question was production. Though production is of great importance, it is not everything. It also requires a sensible and honest financial exchange for distribution purposes. To increase production without altering the external exchange rates and the class of igoods imported will only increase industrial and financial unrest among all sections of our people and make the condition far worse. The solution lies in the Government altering its policy of depreciating the value of money by increasing the volume of credit currency to one of increasing the value of money in goods and services. A quick, sure, and' honest way to do this is by a reduction in the exchange rate on London, and the abolishing of import selection by Government officials, allowing the people to decide the class of goods they desire. If this wei;e done we should have goods coming into the country in exchange f.or our exports, instead of paper pounds as at present. We should have a sensible liquidation of our London funds, which are beginning to give concern to those who understand finance audi commerce. Mr Clayton says: "Whoever controls credit controls the volume of money [ and the general price level. Such a power is a public power." Mr Clayton is entirely wrong. Those who control the issue of " legal tender " < note money lay the foundation on which credit and the production and distribution of goods and services are made possible. In New Zealand the Government, through the Reserve Bank, and! not the associated trading banks, does this, as Mr Clayton should know. Since the Government took office it has increased the note issue by over £30,000,000. On the above issue of " legal .tender money," millions of pounds of credit and currency instruments have been created, such as cheques, bonds, mortgages, bills of exchange, debentures, etc. All these have an effect on prices and force them higher; as prices rise the exchange value of legal tender money falls, legal tender money being the primary or standard money. If Mr Clayton understood finance lie would know that the present financial policy of the Government is destroying the savings bank deposits of the workers, and their life and industrial insurance policy values, etc. *He would know that it also desti'oys the value of bank and insurance and industry reserves. Credit, currency, and instrument are only of value ancli use when they can be exchanged for consumer and personal goods and services. It should be obvious that we are heading for disaster when the great volume of credit, currency, etc., comes into being before goods and services. In conclusion may I draw Mr Clayton's attention to the views of the Prime Minister, Mr P. Eraser, on the taking over of the banfe, etc. Speaking on March 10, 1943, he said: "To-night 1 am not going to> enter into the general question of control and administration of credit, but I do say that the problem at present is not the lack of credit—it istthe problem of material and goods, of commodities." Later he said, " the total amount that the banks put into war loans was about £9,000,000. And what are they getting for it? How much per cent.? In a check-up with one of the banks I find that their 2£ per cent, or 3 per cent, represents to them at present, after income tax, social security charges, and national security tax are paid, about 13s per cent., without any charge for even management. I do not think that there is any State organisation that' could do much better than that. Mr Clayton will see that Mr Fraser also realises the necessity of goods and services, and so far as the bank is concerned! he does not appear to think it necessary for the State to talko it over.—l am, etc., C. M. Moss. April 21.