RAISING THE BANKRATE

Nelson Evening Mail, Volume LXI, 7 June 1927, Page 4

RAISING THE BANKRATE

Professor Toeker makes some very interesting observations on the action of banks in raising the rate. The hanks, lie says, “are not wholly to blame. They are hugely the instruments of forces beyond their control. These forces have created a situation which tho banks must help to correct, and in raising the rate; ' they.adopt, the universally accepted means of correction. Any alternative type of banking system, whether controlled by a State hank, a central hank or a group of hanks acting in association, would be compelled to adopt much the same method if credit is to be regulated and inflation and all its evils avoided. Yet there is ground for criticism of the banks, ho says. Though the raising of the lata is now not a device for exploiting the public and increasing depression, as some would suggest, but a necessary step toward the restoration of normal conditions, yet there is evidence that the present situation might have been much better had the rate been raised and the warning given earlier. The approach of the present situation was patent enough a year ago, and there was ample justification then for the banks to take definite steps to restrict credit. That they did not then raise the rale is probably due to their hope that tho situation would right itself without tho necessity for so unpopular a step. Further, the geneial public have never clearly understood the inter-relations between trade and banking, and much of the criticism levelled at the banks is largely due to the lack of understanding of the mechanism and working of banking, credit and exchange. For this, too, the banks are in some measure responsible. Their published returns, though they comply with the law, are inadequate. They appear so infrequently that insufficient attention is given to monetary changes and their causes, and they fail to provide information which is essential to a clear understanding of those changes. If the banks would avoid much of the criticism, mostly unfair criticism, which they gel, the remedy lies in their own hands. They can avoid it by taking the public further into their confidence and letting the public know at more frequent intervals and in more liberal measure the facts essential to an understanding of the management of their own monetary affairs.