TREASURY LEGAL TENDER NOTES.

Lyttelton Times, Volume CXVII, Issue 17646, 26 November 1917, Page 6

TREASURY LEGAL TENDER NOTES.

TO THK EDITOR Sir, —On October 17 last 6'ir Joseph Ward told the House that " this is not the time to turn aside from the work of financing the war for the purpose of considering the question ot State baniis and premium bonds." iiul Mr Lloyd George's first step towards financing tor the war was to issue millions of £1 and 10s legal tender Treasury notes-, and the " Economist" has since admitted that this was equivalent to a loan free of interest from the people to tho State. On July 17 last the amount of these notes outstanding was nearly £144,000,000. The object waa to prevent ell the gold from being drawn out of the banks, to get in all the srold they could from circulation to strengthen the Bank of England reserves, and to have gold for war purposes. As Mr M'Kenna said, a sovereign in the Bank of England was of more value than a hundred! in the pockets of the people; every man. who hoarded gold was therefore assisting the enemy, and everyone w*e asked to use paper money instead of gold. But there is a. gold reserve of £23,503,000 in the Treasury keld against the notes, besides Government securities and a Bank of England balance for the remainder, and all the notes are convertible at the Bank of England; Our Government began the work of financing for the war by making private banknotes legal tender for six months and guaranteeing their eventual payment in gold. They also permitted the banks to increase their issues, and thus enabled them to absorb all the gold in ciroulaiion and to refuse to pay out in gold. In 1913 the note issue was -under £1,700,000. Now it is over £5,650,000. In 1913 the coin and bullion in tho banks was under £5,250,000; now it is ovor £8,256,000. Why could not the Government have followed the example of Mr Lloyd George, and issued Treasurv lesral tender notes, instead of giving the banks the equivalent of a, loan of over five and a half millions at 3 per cent interest? That would have saved the countrv so much loans, free of income tax. for war or.other purposes in New Zealand. Last August 23 Sir Joseph Ward said that "the House would be asked to extend the period for which bank-notes are legal tender for five years after the. termination of the war " So far aa I can discover, mo objection was mado to this extraordinary proposal. As' we are not using the gold, why should not the Government have drawn out its deposits and cashed the notes, and' sent the last sovereign and half-sovereign t° " s "iT tho Imperial Government in financing tbe war? A quarter of « million of silver and bronze coin, with that in circulation, and tho paper currencv of notes and cheques, is all wo require, and the eight millions balance of gold could have been lent at 5 per cent interest to the Imperial Government, or to havo reduced our public debt by buying in bonds at 63 per cent; or, <Mght millions spent ir- aeroplanes now might help greatly to end tho war. But wizard financiers like circumlocution systems. For example, to givci K»nk* power to issue notes, and then let tno Government borrow of the banks.—l am, etc., J. MILES TERRALL. ■Swannanoa, November 21, 1917.