A NATIONAL BANK.

Lyttelton Times, Volume XXXI, Issue 2594, 29 April 1869, Page 3

A NATIONAL BANK.

The following is from the Wellington Independent of April 24. It is just possible that it may have some connection with the Government requirements for war purposes:— Some weeks since we suggested the outlines of a plan for a national bank, which, however, has failed to meet with the approval of the Otago Daily Times. Our contemporary does not believe in the practicability of such an establishment, as far as we can discover, because he knows very little about currency, and as Mr Disraeli said of his party, he would have to be educated on monetary affairs before his comprehension could be brought to the requisite point. Now, a national bank is either a possibility or not—if possible and of advantage to the country, let us have it by all means—if not, let us have some substantial arguments to show when and where it would fail. We cannot confess to the “ confusion of ideas ” the Times would fain fix upon us, but would recommend to the Otago organ the study of credit and real values, when probably what he wishes to convey would be less obscure. Our contemporary cannot understand the process by which two millions of notes issued by Government could become money, nor how £160,000 interest could be saved by such an issue, but seems to have some indistinct notion it must be by according extra credit to the Government, to which it is not entitled, or a piece of good nature on the part of the recipients. But let us look a little to the basis of issue. The shareholders in a national bank would be the entire population of New Zealand who pay taxes, and the security for present or eventual payment the perpetual revenue derived annually from taxation. Is no credit to be accorded to a perpetual income ? Upon what other security have English fundholders alrea ly lent seven millions of money, but an expectation they will be reimbursed from the taxes. Private Banks issue notes upon the basis of a limited capital subscribed by a few individuals, out of which they have to make an income at some risk of loss. Mismanagement or miscalculation might cause the bank to stop, and to show the difference as regards credit or ability to pay eventually, were it known a private bank was borrowing largely in the money* market, a panic and a run on the bank would most likely ensue, and its business vanish. But we want to get two millions of notes into circulation, and if that can be effected, they can be made to supply the place of two millions of money, which would otherwise have to be borrowed, the interest on which would be £160,000, or we shall obtain a surplus of two millions, which can be applied in liquidation of debts. In the first place, the Government issue these notes in payment to any persons to whom they may owe money, making them a legal tender. Would any merchant be justified in refusing to take them, when he can immediately make use of them in payment of g duties, or any other payments whatever to Government. They are returned to the Government as revenue in some shape to be reissued in payments again, and supply the place of two millions of money. That an absolute metallic basis for a Government bank is not a necessity so long as there are sufficient checks and guarantees of safety anybody who understands the Scotch system of banking can verify, for in the Scotch ciiculation notes are the rule and coin the exception, yet few banking disasters happen there. The Bank of England issues notes on fourteen millions of Government securities before being compelled to have gold in its coffers for notes in circulation. The dangerous point to be guarded against, as we stated previously, is an over-issue of notes. Should there be too many of them their valne might be depreciated. There is always a line of limitation which should never be passed, and which could be ascertained in practice, but should bear some proportion to annual revenue. Supposing Government were to issue ten thousand £1 notes, and two thousand £5 notes, there would evidently be too few, and nobody would doubt the ability of the Government to receive them as revenue, or pay them in coin, or hesitate to receive them as money. A large number might even be in demand for remittances, but the moment an over-issue occurred, an inquiry for the metallic currency would set in. A note has no intrinsic value, therefore it represents something else; people do not part with their property for a bit of paper only. The notes of a private bank ought to represent so many coins in its coffers, and are now issued as a convenience. But for the notes of a national bank we really claim that extra credit to which our contemporary alludes, because a note issued by the Government of New Zealand in the name of the people would represent the credit or ability to pay of the

body politic, and. that It wwlß bear the value affixed to it.would beproved when paid into the National Treasury in lieu of a like number of gold ooinsi It would represent a value which would be affirmed whenever coming ari taxes into the National Treasury. On a private note is inscribed “on demand we promise to pay.” A public note might bear on the face of it, on presentation, “we proi mise to receive.” A note circulating from hand to hand becomes a public document, which should only be issued by a public body except by permission. The Government in England has hitherto delegated its credit and power of circulating notes to the Bank of England— a private establishment with certain public privileges, which naturally seeks its own interest when public panics are superinduced. and the public suffer through the machine being too small for the ship. We think the public accounts and funds could be managed more concisely and economically through a national bank ; we believe such an establishment might conduce ti the welfare of the community, and properly managed be found to pay, not that we think it would be likely to spring into perfection at once any more than a chronometer watch.