A GOLD MINE.

Lyttelton Times, Volume CXV, Issue 16666, 26 September 1914, Page 13

A GOLD MINE.

TO THE EDITOR. Sir, —Very few people profess to understand anything about banking; some people who know nothing about j banking pretend to know all about it; j some people know more about it than they pretend to know ; and other people simply do not want to know anythiay about it so long as they can got as much credit as they want at a low* enough interest, and so long as they can get b g dividends on bank shares. In his “Theory of Credit” (1891), Macleod says: “All tho popular ideas of banking are mere delusions.” And as for the theoretical knowledge, of bankers, he says: “ Young moil go into business and acquire a knowledge of practical banking, and may. rise high in their profesuon. but the’r energies aro absorbed in vigilantly watching tho solvency of their customers, and very; few indeed havo .any training in tins principles of mercantile law, so as to put their experience into words or writing: and as I observed to the Institute! of Bankers in Scotland, I.never knew a, banker yet who could give a definition of his own business." Macbod’s book recommended by Mr A. P. Webster, as the representative of the New Zeal-.nd banks, to those who “ really ” wanted to understand the matter, is rather a rare book to find, so I send two or three extracts, which ought to prove to everybody the importance of tho subject. Mncleod says: “ The buriness of banking does not consist, as is so commonly supposed, in. borrowing money from ono set of persons, and lcnd : ng it to . another set, but in creating and issuing circulating rights of action, credits or debts, on a given basis of bullion, several times exceeding • tho basis, according to the different degrees of perfection on which the system is organised. These circulating cred'ts have exactly the same* effects, in every respect, as an equal amount of money. As Bishop Berkeley said, long ago, a bank is a gold mine. And it is to this faculty, as it wore, of multiplying gold that the prodigious, advrince of commerce and wealth, is entirely due.”—“ In Scotland, where tho organisation of the system of credit is more advanced than in England, it only requires a specie basis of 5 per j cent ” (1891). In 1912, with deposits, current accounts and note circulation of about £125,000,000, tho eight, j Scotch banks only held ‘■'bout six or seven millions of coin. (For the four weeks ending November 8, 1913, £3,623.000. Note circulation at tlio same period averaged £7,842,000. —> “ Bankers’ Magazine.”) Wo are all liable to make, mistakes, and Macleod is not infallible. Bacon said, wo should “read not to believe and take for granted; nor to contradict and confute; nor to find talk and discourse; but to weigh and consider.” When Macleod speaks of the 5 per cent specie basis, it should be evident that 9j per cent of the basis of credit and banking is the other wealth, and land and resources of the ale, which depends upon their labour, and character—uot , forgetting) their courage and ability to defend the country. The Italians sny, “ What fs worth gold is gold.” , About a hundred and fifty years ago Sir James Steinrt) wrote'that “ nearly all forms of wealth could bo, as it wore,- melted down into bank money (by being held as security), end thus, by means of cheques, a circulating medium of the most elastic* kind could be maintained.” On the; title page of Madeod’s • book he quotes tho words of Demosthenes, spoken two thousand years ago: “If you weiot ignorant of this, that credit is the greatest, capital of all towards the acquisition of wealth, you would ba utterly ignorant.”

In an older book, Macleod says; “ As tho use of money or credit is to set industry in motion, and inasmuch as they have no use unless they do that, their beneficial effects are not to be measured by their actual amount but by tho industry they generate.”— " Money locked up in a box, or credit unused only represent latent power, and not actual power.”—"They rcsemblo the steam engine of a mill which is not going, and which is of no use until set in motion.”—" Cash 1 credits, which have been one of tho safest and most profitable parts of Scotch banking, and which have done so much for tho prosperity of that country—were created—for tho express purpose of stimulating future operations out of which tho credit was redeemed.”—" All banking profits are j made by the excess of credits banks can create and maintain in circulation in excess of the gold thoy hold' in reserve.” All tho gold in tho Now Zealand banks can he demanded by tho Government and people on deposits) and notes. Why, then, should not tho State supply and control tho paper currency and take " all banking profits ” ? Why should there be any kick of employment? t Henry George says: "'When wo consider that labour is the producer of all wealth, the creator of all values, is it not strange that' labour should experience difficulty in finding employment? Tlie exchange for commodities of that which gives value to nil.commodities ought to be the most certain, and easy of exchanges. One wishing to exchange labour for food or clothing. or any of the manifold things which labour produces, is like one wishing to exchange gold dust for coin, wool for cloth, or wheat for Hour. Nay, this is hardly a parallel, for as the terms upon which the exchange of labour for commodities' tako place are usually that the labour is first rendered, the man who offers labour in exchange generally proposes to produce and render value before value is re* turned to him.” The establishment of a State bintc would be better for tho country than the discovery of any gold mine.—l am, etc., J. MILES VERRALL. Swannanoa.-