The Gisborne Times FRIDAY, NOVEMBER 3, 1933. THE BITTERNESS OVER THE RESERVE RANK PROJECT.

Gisborne Times, Volume LXXIII, Issue 12092, 3 November 1933, Page 4

The Gisborne Times FRIDAY, NOVEMBER 3, 1933. THE BITTERNESS OVER THE RESERVE RANK PROJECT.

It is certain that the Reserve Bank Bill will, in due course, reach t,l ’° statute book. For all that, its passage through Parliament is being marked by not a little bitternessThe plain facts are that ihe Government is determined that the proposed institution shall he established and, although many of its adherents may have grave doubts as to whether it is really required, they are not prepared to embarrass their leaders by withholding their support. During the second reading debate, nothing emerged, to discount the belief that the primary object of the lheasure is to assist the Government. Mr. Forbes, it is true, suggested; in the course of his speech, that the people as a whole would benefit from its establishment. ~ With its aid, he claimed, primary produce would rj s e in value ; spendnt'on would he checker] • money would ho cheapened, etc.? etc! How all these good things were

to -bo brought;, however, attempt to explain. Seemingly, what he aimed' 'at 1 was to soothe Government- ■ supporters ; who. at© sceptical on the matter. At all events, it remains just as big a mystery as before how the people- are to be helped by the bank out of their difficulties. There ai;e, still several Vexatious features of the measure. One of the most prominent is the question of control of''".the. institution. As the Bill stands at present, it is plain that, for toe next' seven years, the Government will be in control, Per medium of the directorate. No doubt, it is true that the present Government cannot bind its successors, 1 but, before the electoral voice of the people will again be hoard, the new bank will b© in full swing and., for some years afterwards, the legislative “powers that be” will tiot.be able to make any radical alteration in the personnel of the directorate. Meantime, therefore, critics who hold, that the mea-. sure should, provide for absolute State control need not be overworried. As the proposed Reserve Bank will not be a trading bank, another matter which is agitating the minds of many people is what will be the effect of its establishment upon the six commercial banks doing business within the Dominion. Those who stand for currency reform complain that the trading ■ banka will remain free from interference and, that, consequently, monetary control will continue as at present. But what guarantee is there that the trading banks will not be subjected to dictation ? It is almost certain that the establishment of the Reserve Bank will affect the policy of- the trading banks. There, can be ho question, for instance, but that the Government intends to instruct it 3 directorate, from time t 0 time, on the matter as to wliat the rate of exchange shall be. As long as the Government (or the Reserve Bank) will need to take over unrequired balances in London, the trading banks may rest content, as they decided to do under the present indemnity . law. But there is Mr. Coates’s claim that the new institution will play a very important part in maintaining the Dominion’s trade balance. What this means is but thinly veiled. Seemingly it is intended that exchange shall be kept pegged up high until prices in I‘ospect of primary products rise to a much higher level. As business people will require to import, the consumers will, therefore, continue to bo penalised, Mr. Forbes's grandiloquent claims on behalf of the Reservel Bank will bo hold by most people to be in tlie nature of mere “eye-wash.” The Government, as i 3 well-known, has already lost heavily over the banks indemnity scheme, but, it is clear that, it wishes to make up much of its loss by forcing the trading banks to hand over to the Reserve Bank their gold’ at book value, tlie profits going not to the Reserve Bank, but into the Consolidated Fund! In this connection, it may be the ease- that this section of the measure may be tested in the law courts by the banks, but their chances of success do not appear hopeful in the' light of Mr. Coates’s contention that in England profits on reserve gold resulting from currency legislation have been appropriated bv the State without question.