BANKING IN DOMINION

Hawera Star, Volume LIV, 13 April 1934, Page 4

BANKING IN DOMINION

FURTHER. EVIDENCE GIVEN. MONETARY SYSTEM INQUIRY. rn« iwi-arapb— Vrew Association.. WELLINGTON, April 12. Examination of representatives of the Associated Banks, in amplification of the statement of the hanking policy in New Zealand presented on March 7, was continued this aiternoon by the Monetary Committee. The banks weire represented' bv Messrs J. 'Shaw-, E. C. Fussed and T. G. A. Harle. Replying to questions by Mr F. Langstone, ALP., Mr Fusse'll declared London had no dominance over finance in New Zealand. The banks just settled their balances in London, and that did not give London control over finance in New Zealand. He said the banks were willing to lend more at t-he present time, but could not because the people could not borrow-.

Mr Langstone: What coused prices to fall? They do not fall of their own volition.

Mr Fussell: Ono'cause iis t-ho increase of supply i-n proportion to demand. Mr Fussell went on to -explain that it had not been the policy of the banks to call in overdrafts. When they asked a man to reduce his overdraft It was done in his own interest because his business was becoming unsound. . Asked by 'Mr Fussell what fault he found with the banking system Mr Langstone said he found fault in the 1 minks trying -to- cover up the fact that there w-as such a thing as a costless issue of credit.

Mr Fussell: The banks do not get any more value than they give. The banks do not consider anything costless that, involves them in debt.

Mr Langstone asked whether if the banks had) the legislative authority of Parliament they could avert slumps by issuing securities -to people without assets.

Mr Fussell sai'd it could not be done that way. When inflation started it. was very difficult to stop it. Mr Langstone: Then the-State is the only authority that can do it?

•Mr Fussell: The State is the onlv authority that can giv-e the people money.

•Mr J. N. Massey, ALP., asked Mr Fussell for a definition of costless credit.

Air Fussell: There is no such thing. It must cost somebody something. Air Massey: Do -banks make profits by manufacturing money? Air Fussell: The banks put value into a liquid form, they do not create it. To Mr H. AI. Rushiworth, ALP., Ah' Fussell' said purchasing power existed and was turned into evidences of purchasing power by the banks, which was a wonderful service to humanity. Mr Rushworth: 'So you say you represent those on the box seat. I represent the submerged tenth.

Air Rush-worth asked if there was any fundamental' reason w-hy the Government should not issue notes instead of borrowing overseas. Air Fussell: There is a political reason. If ten million pounds is issued the people will say, why not a. hundred millions?

Mr Rushworth replied that New Zealand was being forced by circumstances to run ,tlie risk of" that danger. At the conclusion of the sitting the chairman said the committee was agreeably surprised at the vast amount of information imparted by the representatives of the banks.