THE New Zealand Herald AND DAILY SOUTHERN CROSS. MONDAY, JUNE 7, 1886.
With a great many amateur financiers and statesmen there is a strong craving for the issue of Government bank notes. A Bill now before the Assembly with this object in view, and introduced by Mr. J. 0. Brown, will happily give an opportunity for having the subject discussed, and no doubt a flood of light will be thrown on the currency question by those who are fully convinced that an Act of Parliament can do anything, and that a Government with " a bale of paper and a printing press," can create fabulous wealth. There are some peculiar features in Mr. Brown's Bill, which may be regarded as intended to give greater vitality to the notes; and as becomes the legislative progeny of a goldfields' member, the measure embraces also the purchase of uncoined gold, its refinement, and resale either in the colony or elsewhere. These Treasury notes are to be of various denominations, but not in value less than £1 sterling; and they are to be put in circulation in the payment of wages, salaries, and other debts due and payable in the colony, as well as for the purchase of gold. They shall be " for every purpose, and within the meaning of every law, civil or criminal, be deemed to be bank notes." A peculiarity in this new currency is, that the notes shall bear interest at the rate of 3d per £ per quarter, that is to say 5 per cent., payable on the note being presented at the Treasury for payment. A provision of a rather needless stringency is appended that there shall at no time be in circulation more than one year's total revenue, estimated at four millions sterling; and the notes are made legal tender, These notes are further made payable on demand with the interest added ; and to facilitate payment, agencies may be established for issue, re-issue, and payment; and the Colonial Treasurer is to be empowered to pay out of the consolidated
I fund such sums as may be required to be kept in hand at the various places i for the purpose. The Governor also may appoint agents in various parts for the purchase of gold, but as this is extraneous to the principal objects of the Bill, it need not be considered in this connection. From this brief synopsis of the mea- , sure it will be seen that the documents proposed to be issued are of a twofold character: they are at once interestbearing Treasusry bills, and Government bank notes. In the former capacity they may be of. use, as a ready means of raising a loan to the extent of four millions sterling, at five per cent., without going on the London market, or having the unpleasantness of discussing the propriety of a newloan in the Assembly. We can readily understand how such documents, bearing interest at five per cent., would be taken up by those who may be desirous of investing money at that rate of interest in Government securities. This would of course give to the bills or notes, what may for lack of a better name be called "circulation." That is to say, a large number of them may be retained in private safes and in the strong rooms of banks; and, in the latter case, might and probably would be regarded as very excellent substitutes for the gold or other securities required to be kept as against their own bank notes in circulation. But there are two objections that would be raised against such a feature in the measure: in the first place, it would be the raising of a new loan of greater or less extent—possibly to the extent of four millions—at a higher rate of interest than that now paid on Government loans in the London market; and in the second—and this is more serious still—the value of the notes would always be required to be kept in the Treasury, in order to provide against a possible panic, when the Treasury might be rushed, and every note might be required to be paid in gold. In so far then as these documents answer to the character of Treasury bills, bearing interest, and are hoarded ' and kept as such, they would be of no value whatever to the State, inasmuch as the same value in gold would require to be held in hand, at all times ready for their immediate redemption. It would be a loan, bearing a high rate of interest, the proceeds of which would be lying dormant. But it is in their capacity of bank notes, circulating as currency, that the utter futility of the proposal is manifest. The Government could truly enough place them in circulation, to the extent of the issue of probably more than a half of the year's revenue. For whatever may be the amount of the gross revenue expended within the colony, and whatever the amount of loan similarly expended in public works or otherwise within our coast line, to that extentwhether two millions, three millions or four—can these Government bank notes be put in circulation, ' Every salary paid, every purchase made, every culvert built, every farthing spent by every department within the colony, can be represented by brand new bank notes. But for what period of time will each of these notes—as bank notes—continue to circulate 1 Only until they reach the j paying-in counter of any branch of any bank-doing business in the colony. We do not from this insinuate that the banks, either by combination or individually, would set themselves in hostility to the new issue or seek to limit their currency. But they would treat them as they treat the bank notes of one another. They would certainly not re-issue them, any more than they would re-issue the bank notes of other banks. They might possibly retain them as securities bearing interest, in their capacity of Treasury bills as already considered, but as bank notes these documents would cease to exist on their first contact with any banking office. They would, as is the lot of other bank notes, be presented at the Treasury or its agencies, and turned into gold, or used in settlement of balances ; and if issued again by the Treasury their period of currency would be exactly the same. Only two courses would be available for the Government : either by legislation to suppress the issue of notes by all banks within the colony, and, as "an Act of Parliament can do anything," this could bo done; though it would be a little expensive, and the expense and trouble of it would somewhat discount the advantages of Treasury notes; or the Government could go into ordinary banking business, receiving deposits, discounting commercial bills, issuing bills of exchange, granting overdrafts, and adopting the various other means by which banking institutions accommodate their customers and form a clientele that keeps their notes in circulation. That the people of the colony are prepared to launch out in this direction is not very apparent, but I this contingency may as well at once be faced, if it is desired to give any existence to these Treasury notes in the ! currency of the colony ; for without such aids to vitality every Treasury note will be stillborn. There is no doubt that there are multitudes in the colony whose inclinations will prompt them to view with favour so simple a means as that proposed in Mr. Brown's Note Currency Bill for creating wealth; but it requires no great knowledge of the principles of banking, but merely the exercise of simple common sense, to see that the proposal is arrant nonsense.
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Bibliographic details
New Zealand Herald, Volume XXIII, Issue 7657, 7 June 1886, Page 4
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1,285THE New Zealand Herald AND DAILY SOUTHERN CROSS. MONDAY, JUNE 7, 1886. New Zealand Herald, Volume XXIII, Issue 7657, 7 June 1886, Page 4
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