The Grey River Argus WEDNESDAY, June 20, 1945. THE STATE AND BANKING.

Grey River Argus, 20 June 1945, Page 4

The Grey River Argus WEDNESDAY, June 20, 1945. THE STATE AND BANKING.

The private shareholders may appear to lie within their rights whey the object that in buying them out the State will be treating the Bank of New Zealand differenly from the way in which it does the other trading banks in the country. But they spoil their case in this respect when their propaganda makes out that every other private bank will eventually be eliminated by the State. The Chairman, Mr Donnelly, at the annual meeting last Friday. said that the institution, as part of the banking system, was on the whole an advantage for the country, and was not guilty of the charges made by currency reformers against banking generally. It would thus appear that the defenders of the system deny that banks create money and maintain the contention that they only handle what capital their customers place at their disposal. Professor Soddy, Ihe. noted scientist, does not countenance that claim. Pointing out Ruskin’s definition that all money, properly so called, is an acknowledgement of debt, he quotes another authority to the effect that when there is no debt there is no currency, and that the quantity of currency in a country is the quantity of debt ■which there -would be if there were no money. What legal tender will buy, is what the community owes the possessor of that money, but bankers have mixed up with legal tender currency that cannot be “ nailed to the counler”. Soddy points out that the creation of any money, legal tender or not, creates a new debt against the community, but though this is so, the modern cheque, which a century ago private bankers substituted for their notes -when the notes were, in Britain, suppressed by Act of Parliament, is not legal tender. Nevertheless, the banks, in creating such iion-legal tender, impose a debt on the community, although such currency lacks national ratification. The reason why the currency to-day is more or less inflated, is precisely because the banks can create money. Soddy remarks- “In the past, governments, bludgeoned by banking bullies,.have been prevented from carrying out their most vital, and elementary function of providing the community with honest legal tender for the exchange of its goods and services, In consequence, the £ buys now what cost

5s hi 191.3, and the nation lias ■been forced to give up to the banks now between five and six thousand million pounds worth of wealth for nothing.” Supposing, however, o the banking were done by the State, the community would not remain liable tor such a tribute. Soddy says: “’lhe only advantage the. system offers from the national standpoint is that under it restitution of the v ealth obtained from it on perpetual credit, or, at anyrate what the os £ will now buy, is possible, whenever the nation has the guts to demand it.” If bankers, instead of creating money, were to lend money of their own, or that of others provided for such purpose, they could still compete for the most credit-worthy borrowers. The State could issue money to consumers and, if ever necessary, withdraw it by taxation, relying on a constant price index as a guide, but. the present banking system prevents constancy in the price index. Thus banks go by the number of borrowers in boom periods, inflating credit, but when there is a slump, the credit issue is withdrawn to restore the value, not of goods or services, hut of money which has been debased. Prosperity, according to Soddy, limits or dispenses with the necessity of money, whereas poverty increases its quantity, because the bankers are not concerned so much with the people’s need to exchange goods and services, as they are with varying the money standards so as to profit thereby. It is not, therefore, any peculiarity in tlie Bank of. New Zealand, not even the fact of the State’s large .holding, which has given rise to the proposal for a State entry into trade banking. It is rather the conviction that the Slate can and will control credit and currency with an eye to the advantage primarily of the whole community, rather than that of a section of the community only.