FUNCTIONS OF BANKS

Nelson Evening Mail, Volume 78, 28 June 1943, Page 1

FUNCTIONS OF BANKS

ITo me Editor 1 Sir, —The Sydney “Daily Telegraph” has published the following report of the U.S.A. Treasury Department. “62 per cent of the Increase in National Debt was taken by Commercial banks, 13 per cent, by the Federal Reserve banks” (the Federal Reserve banks are also private concerns), “8 per cent by insurance companies, 4 per cent, by Savings banks and Government Departments, the remaining 13 per cent, by individuals and corporations.” How much of New Zealand's National Debt of £464 millions is held by Commercial banka and the Reserve bank (whose policy is the same as the Commercial banks—i e. to lend at interest the credit it create*} we do not know. Whenever the question is asked in Parliament the answer given is always “It is not in the public interest to disclose the information.” How the private banks acquired War Bonds during the last war was described by Mr T. Johnson, Secretary for Scotland in the present ministry, as “the greatest act of grand larceny in British history.” How it is done, this marvellous creation of debt, is clearly explained in the Macmillan Report, the report of the ablest and most reliable public committee that ever sat to enquire on questions of finance. It says “It is not unnatural to think of the deposits of a bank as being created by the public through the deposit of cash, representing savings or amounts which are not, for the time being, required. But the bulk of deposits arise out of the action of the banks themselves by granting loans and overdrafts and by purchasing securities. Let us suppose that a customer has paid into the bank £IOOO in cash and it is judged from experience that only 10 per cent of the deposit need be held actually to meet the demand of customers, then the £IOOO received in cash will support deposits” (i.e. loans based on ledger entries) “amounting to £IO,OOO. The bank can carry on the process of lending or purchasing investments” (by giving for them nothing more than its own cheque) “until such time as the credits created or investments purchased” (e.g. War Loan. Municipal Loans, etc.) “represent nine times the amount of the original deposit of £1000.” It is to be noted that the process described in the Macmillan Report is the normal process in operation in peace time. In war time it is enormously extended and ignorant politicians lead nations into commitments of bondage to those whom Ruskin describes as “the real thieves of Europe, the real sources of all deadly war in it.” The Archbishop of Canterbury has said, quite simply and truly, “Banks should only be allowed to lend money actually deposited with them. Money should be issued by the Government, not by bankers who charge it to the Government as if it were dust ” Why will these Churchmen meddle into money matters?—l am, etc., “ONE OF THE 13 PER CENT.” Nelson, 24 th June.