STATE BANK.

Lyttelton Times, Volume LXXIX, Issue 9988, 17 March 1893, Page 6

STATE BANK.

TO THE EDITOR.

Sir,—" Oudeis” does not appear to understand that cheques and cash credits aro just aa much money as bank-notes. Maclaod says that bank credits are money, and that both notes and cheques are currency. He says: “While banka were few in number and confined to the rich, and, moreover, were isolated from each other, notes were the most convenient form of circulating cash credits. Bub now that banka have multiplied in number, and entered into relations with each other by means of clearing houses, when population has so vastly increased, and almost everyone keeps a banking account, cheques have not only superseded notes to a vast extent, but have increased to an enormous amount, so that the quantity of notes is constantly diminishing and the quantity of cheques ia constantly increasing.” It ia because “ the account books of a bank are themselves mediums of exchange ” that I advocate the establishment of a State Bank, What is gold and silver coin bub a. medium or exchange, or, aa Macieod pays,

“ a form of metallic credit P” Mr Macdonald telle ua that the only hope of better times is bimetallism, or the discovery of another California. But if all we can do in regard to the former is to protest, and in regard to the latter to wait and hope, it might be just as well to study the Belgian railway finance, whereby the public credit was proved to be aa good a medium of exchange as gold or silver coin. Mr Macdonald advises working men to aid their employers by helping in the solution of the currency question. But paper money is the chief currency of the present time, and the State Bank question is the currency question. Why should the people of New Zealand incur debt and pay interest in and on the bank credit of private and foreign persons, aa though they were actually borrowing so much “appreciated” gold? The moat practicable way of competing with the Indian silver currency (or, rather, with cheap Hindoo labour) is surely to cheapen our own paper currency by manufacturing it ourselves, instead of borrowing it at the price of gold from England. If, as Nicholson says, “nearly all kinds of wealth can be converted into banking capital, and, by means of cheques, a circulating medium of the moat elastic kind can be maintained,” why should we want to increase our “metallic credit” by bimetallism ? And if, aa Macieod says, “a bank is a gold mine,” ia it not possible that a State Bank might be more beneficial to this Colony than the discovery of another California P—l am, &c., u JHN MILES VEERALL.

TO THE EDITOR. Sir,—ln reference to Mr Verrall’a letter of March 8,1 learn that it was he who furnished the information relating to the Belgian scheme, and therefore he before all others should be able to furnish the particulars relating to the manner in which the work was carried through to its final completion, paying for itself and becoming the property of the Belgian people. I admit Mr Verrall ia an expert in banking business, that ha observes the politeness of a gentleman, and signs his own name, while I stand behind the scenes. His most important remark I do not follow in the light he wishes to impress it, that is, as favourable to a State Bank. He says, “Cash credits without interest could be given for the creation of public works, to be repaid by profits.” I wish to emphasise “to be repaid by profits.” Now this seems to me to resemble in every essential the Belgian mode, except that it lacks the simplicity of it, and raises as a State Bank scheme an insurmountable barrier of opposition on the part of the banking interests. The “ credits ” must be split up to pay workmen, who have to pay tradesmen, who will desire to bank the same, and will not be able any more than, as is said, would be the case with mortgage notes, because the private banks would insist upon immediate balancing, and would not wait any more than a State Bank could till the “ profits ” enabled the Government to take up the “ credits.” If the condition applies to the one case it must to the other. I beg here to say I never claimed having introduced the Belgian scheme. When I read the notice of it, it seemed to me to fit our times and requirements, and the more it is turned over the more correctly it seems to fit, if Mr Yerrall would but tell us how it was done. And in this place I would call attention to the fact that, at the time when the public works system was in full swing, 10 per cent per annum was the rate charged by the banks for overdrafts. Millions bad been introduced into the Colony, while at the same time money was not to be got except at ruinous interest, showing to my mind it was not in over supply. What ia the position now that we have practically ceased borrowing and building public works ? There is no call for money; the supply is greater tban the demand; we don’t know what to do with it nor how to invest it; I speak from experience. The above (as I think) goes to prove that if public works are in progress we may increase the note circulation in proportion. I admit being quite ignorant of the primitive habits of hoarding their notes, eaid to be practised by the Belgians. Also in what light the Belgian banks viewed the action of that Government in connection with its building railways, &c., and therefore am obliged to fall back on the fact, as stated by Mr Verrall, that the undertakings were practically and successfully carried through, which to me is more than all the theoretical knowledge in the world. Depend upon it, if Mr Verrall could be induced to hunt up the particulars of this Belgian matter, and show. us how to carry on the same creation of public works as was and perhaps is being carried on there at this time, the whole country, including my own humble self, would be grateful to him. Oh! that he would let the banks and State Bank and such great interests severely alone, and bring his experience to bear upon this single department. I have spent much time looking into this matter with outside assistance, and the conclusion arrived at is that neither the State Bank mode nor any other is practical, if interest in any form enters into the business. But for current account and free circulation there is no impediment whatever, provided private bank-notes and mortgage notes are not interchangeable. The Post Office Savings Bank could carry on this small department. Of course the private banks would not touch such business, although for meeting local emergencies mortgage notes would be equal to bullion.—l am, &e., H.J.C.