THE FINANCIAL SYSTEM.

Manawatu Standard, Volume LII, Issue 70, 22 February 1932, Page 9

THE FINANCIAL SYSTEM.

ADDRESS BY MR P. B. FITZHERBERT. , FORMATION OFASSOCIATION. Monetary topics and the financial system were discussed at some length by Mr P. B. Fitzherbert, of Wellington, a former resident of Palmerston North, at a meeting of residents in the Empire Hall' last night. The speaker quoted from the utterances of British authorities to show that public opinion in the Old Country did not indicate any marked alteration in the methods of finance and that, such being the case, it was not worth while waiting until European minds awoke to their true position. The financial system or lack of system had grown, up in a “hit or miss fashion, (and, though, having functioned in some sort of fashion for a century and a half, had not very definitely broken down beyond the possibility of repair. The three predominating causes of the slump, all coalescing to make the consequences catastrophic, were yhe bank credit system, the compounding ,of interest and the use of machinery without making up for loss of spending power. “The bank credit system owes its existence to the shortage of metallic money such as gold and. silver or, rather, to the methods of its use, no said. “The bank system involves the use of credit under the misapplied theory of velocity of circulation which results in the accumulation of huge debts during the period when credit is easily available and then cessation o credit brings about a . shortage oi circulation resulting in a money “The’ compounding of interest also is an important factor and although the compounding of interest is not universal there in always a compounding tendency with the result that a country becomes after a. while overcapitalised and capital has to find an outlet in. a new country. “The process has gone on . long enough to bring about a condition of over-capitalisation in all European and American States. The use of machinery has become a universal factor in production but it rejects people

from employment without providing them with means of subsistence.

“It is not possible under present methods to re-employ the displaced men except in new production. _ The loss of spending power of the rejected workers is not replaced and so the result is that production suffers and people tend to become permanently unemployed.” Mr Fitzherbert then outlined the necessity for establishing a complete clearing house in London and, possibly, in Australia and other countries, doing all our overseas trade in foreign money; the setting up of a Central State Bank with sole control of note issue; the issue, of State inconvertible notes under most careful management by a specially chosen board clear of political control or influence. A large number of questions were put to tho lecturer and the meeting concluded with enthusiasm. Some CO residents remained and it ms decided to form a local branch of the New Economic Research Association,- the names of all present being handed in. It was . also decided to take a definite stand on the subject and to request the member for the district to define his attitude.