Reserve Bank Issue

Manawatu Times, Volume LIV, Issue 7269, 23 September 1933, Page 4

Reserve Bank Issue

To tlio Editor. Sir, —In Ms elaborate pica on behalf of the proposals for the establishment of a Itcscrve Bank in Now Zealand the Minister of Finance suggests that a centralised note issuo backed by the combined banking resources of the country would inspire the utmost confidence and have a prestige that would be of great valuo in emergencies. A somewhat similar plea was put forward on behalf of the Bank Charter Act of 1844 in England. In fact, tlio arguments put forward in support of that measure are largely tlio arguments used in connection with our Reserve Bank proposal and it is of interest to note that the Bank Charter Act of 1844 failod to achieve what its promoters claimed. It was destined to prevont tlio abuse of credit; to ensure the community against the great loss and inconvenience of commercial panics. The promoters of this Act were not unlike the promoters of the New Zealand Reserve Bank Act in thinking that bank notes .were the most important of . all tlio instruments of credit. The Bank Charter Act of 1544 gave the Bank of England its status as the Reserve Bank of England and insofar as this change in England's banking policy related to a desire to prevent commercial panics it was a failure. Panics occurred with startling punctuality, ono occurring just four years after the Act was passed, and another followed nine years later. There have been many more since that date, and in no instance has a reserve bank in any country been the means of helping that country in times of emergency. The existing world depression affords a striking illustration of tho impotency of Reserve Banks. They have failed to live up to the claims made on their behalf and there would appear to be, under existing banking practice, no shadow of justification for the creation in New Zealand of an institution incapable of functioning in the direction its promoters claim. I am, etc., "CURRENCY REFORM."