THE STIMULANT OF MORE CURRENCY.

Manawatu Standard, Volume LIII, Issue 313, 2 December 1933, Page 3

THE STIMULANT OF MORE CURRENCY.

(Contributed by N.Z. Welfare League.) Many speakers and writers express the opinion that a shortage of currency is one, if not the chief, cause of our troubles: —some go so far as to blame the banks for “holding all the money” and thus hampering, improvement in trade.

When the actual position is examined impartially there is clearly something wrong about this assumption. In the first place to name scarcity of money in circulation as a cause of the depression is obviously putting the cart before the horse, Money circulates through the activities of business and trade —buying, selling and the employment of labour. It is a fallacy to assume that the mere issue of more currency would improve business. It is the will to use the money that is necessary, otherwise any further issue of currency would only increase the currency holdings in the banks. Statistics show that there is more money on fixed deposit in the banks in New Zealand to-day than probably at any previous time. This indicates the absence of a will to spend, or to invest, by the owners of that money —- thus it seems that the' lack of free circulation of money is not due to a shortage in currency so much as to a lack of confidence by its owners.

Cheques are practically currency in business '(though not legal currency)— and there is more than enough coin and notes in existence to carry out (with cheques) all current transactions and personal expenditure. To blame the banks for “holding all the money” and thus curtailing the supply of currency is not reasonable, for the money they have on deposit has been placed there by its owners, and can be drawn out for use by those owners at any time —the banks cannot hold it or prevent its circulation against its owners’ wish. In any case the Savings Banks hold about as much money on deposit as the Trading Banks.