RECONSTRUCTION PLANS

New Zealand Herald, Volume LXX, Issue 21520, 17 June 1933, Page 15

RECONSTRUCTION PLANS

„ '^' r > -May I reply to your Correspondent, Ex-Banker.'' Your report of my remarks to the acting-Prime Minister was of necessity curtailed to allow of adequate space to the statements of His Worship the Mayor and the lit. Hon. J. G. Coates' reply, but had the report of my remarks been fuller it would have shown that I traced the decline in weekly bank debits to individual accounts (other than Government) from approximately £18,000,000 in 1929 to £10,000,000 iii March, 193.3, and that those figures synchronised with the startling increase in the registered numbers of unemployed from 2429 in 1929 to 65,652 in March, 1933. Further, 1 stated that fixed deposits had risen from a preslump level of about £25,000,000 to some £36,000,000 in 1933. Although New Zealand's exports are greater per capita than those of any other country in the world and export quantities greater now than ever, overseas prices have steadily declined, largely as a result of loss of international confidence, causing millions of unemployed and consequent lack of purchasing power. Bearing in mind the fact that over £80,000,000 was raised and spent by this Dominion to prosecute the war, the pertinent question is asked "would we now falter to find £10,000,000 in an endeavour to rehabilitate this young country?" "Ex-Banker" must know it is quite usual for advances to exceed deposits. During 1927 they did' so by 4 per cent, cn the average, throughout the \ear (1933 Year Book, page 496). My point was that the ratio of deposits to advances has been steadily rising for many months above the normal figure so that on May 15, 1933,

advances were 81 i per cent of deposits, I as against 92J per cent at the same date in 1932 (Monthly Abstract of Statistics for May, 1932, and May, 1933). Jf he will examine the latest figures he will see that deposits actu-

ally exceed advances by some £'8,000,000. "Ex-Banker" has adopted an appropriate nom de plume tor we ! find modern (not "ex") authorities, such as Professor Davenport in "Econoniics of Enterprise - ' say, "Banks do not lend their deposit l ;, but by expansion of credits create deposits." And . the MacMillau report says, "H.v granting loans, allowing moneys to be drawn on an overdraft, or purchasing securities, a bank creates money." In the Bank of New South Wales circular last month there appears: — .We may even as a result of the World Conference see" initialed measures for world recovery, but it would be folly to remain inactive in the expectation of such a possibility. . . . What can we do to help ourselves ? Two things are necessary: to pro- I ride money and to provide means of geUiiia money to work. The provision of the money is the easier of the two It may np- / pear an unorthodox statement, but it is. nevertheless, true, that there is no dearth of money awaiting investment in Australia at present, and that once (hero is opportunity for investment it will increase. Current saving has been in excess of current investment. One only need point to the steady increase in fi:;ed deposits to show thip. "Ex-Banker's" opinion of the impossibility of New Zealanders providing £10.000,000 "without causing widespread ruin and distress," is abundant evidence of the lamentable ignorance of the fact that widespread ruin and distress are in our very midst to-day. Added to the sorrv spectacle of unemployed, losses of life's savings? lrozen assets, and lack of confidence, is the demoralising influence of thousands of our boys and girls being deprived of thr> right to work. Even lit. Hon Mr Coates said: "It would bo impossible for the conditions to be worse than they are to-day." The citizens' unofficial committee supporting the Mayor in efforts to got the Government to do something does not suggest that our £10.000.000 loan scheme will be the panacea for all our troubles, but we do suggest to our . critics that the present aopalling state of affairs should not be allowed to continue to drift without an effort to alleviate it, and we would challenge our. critics to put forward constructive proposals which will restore confidence •nd thus relieve the present situation. C. F. Bennett.