THE RESERVE BANK.

Hawera Star, Volume LIII, 6 November 1933, Page 4

THE RESERVE BANK.

(To the Editor.) Sir, —In your issue of Saturday Mr. 11. J. Finlay has asked a number of questions in connection with the Reserve Bank Bill which passed the House of Representatives last Thursday. The measure has met with a certain amount of opposition of a very confused nature and from very mixed motives. Some object to the Bill because the bank is not under 'State control, others because the State has too much control. Farmefs fear that it may lower the present exchange rate, while businessmen imagine that it may peg the exchange indefinitely. The Bank of New Zealand dislikes it because it will no longer have charge of the public account and so on. So we have opposition from Conservatives, Socialists, self' interest, currency cranks from fear, doubt ana ignorance. After investigations over a period of two years the Government has decided to establish the institution, bqlieving that it is in the best interests of the country that it should control the monetary system and credit of this Dominion within the powers conferred upon it by the Act. Mr. Reginald McKenna, chairman of the largest trading bank in the Empire, has described a central bank as a “reservoir of credit” and the trading banks as the “pipes which convoy this credit to a thirsty economic system. Central banks have not prevented the world slump, but under a decentralised system, we should have crashed earlier and more completely. The Government is putting £1,000,000 of cash and securities into the bank, but on the- other hand it is taking all of the profits over £25,000 per annum, plus any profit on the gold and bullion held by tne trading banks. The bank’s profits are estimated at over £600,000, exclusive of the gold and bullion. The Central Bank of South Africa has been referred to as a failure. 'This bank held large sterling assets when Great Britain went off the gold standard and in consequence lost practically all of it's capital j but this is only part of the story. .Last year this bank made a profit of £BOO,OOO, and the Commonwealtn Lank mane £BOO,OOO for the last half-year. Under Section 40 of the PublicRevenues Act the Government is authorised to issue treasury bills against revenue up to 50 per cent, of the estimated receipts for the year, and as income tax is paid at the end of the financial year the 'State is now paying the banks 5 per cent, on many millions of money'. Australia issues these bills through the central bank and pays less than half the price we do for the accommodation.

1 Mr Finlay' and I belong to the same branch of the Farmers’ Union and I would remind him that the central executive, while asking that the Governor and Deputy-Governor should be appointed by: the State, expressed the opinion that the bill should not be jeopardised and gave Mr. Poison a free land in the matter. Mr Finlay’s remarks about the “overwhelming opposition,” “the Government’s audacity” etc., are peculiar, in view of the fact that a meeting of protest in Hawera and district was only attended by about two dozen people. I shall be very' glad to supply Mr. Einlay. with the Hansard report of the debate on the Bill and will await his comments with interest.—l am, etc., H. G. DICKIE.