"FROZEN" DEPOSITS

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

"FROZEN" DEPOSITS

Sir.—-In your issue of Tuesday, "Layman," _ in commenting oil "Ex Banker's" statement: "That it is an error to describe iixed deposits as frozen, cites the case of a depositor transferring. £IOOO from current account to fixed deposit, whereby ho contracts that, during the period of fixation, the money ceases to be available as current purchasing power, and, therefore, becomes frozen. Here "Layman," following the practice of the currency reformer, stops half-way, conveving the impression that the end of the'jouruey has been reached. Apparently, accord-' ing to his contention, the banks pay out huge sums, annually, in interest on deposits, merelj* for the pleasure of, like the collector of old china, having this monej* in their possession, so that the directors and staff may. occasionally, visit their vaults and gloat over it. Further, he sets out a statement showing how deposits are increasing while advances are shrinking, which, he states, is caused b\- the banks cutting down the advances. Is not this shrinkage due to the fact that all payments to the borrower's current account are credited against his advance, reducing it by that amount; that most of the nionej" paid out by the banks, advances included, during the day is back again beiore closing time, thereby reducing the various advances against the respective accounts into which it is paid. It appears to mo that every pound of fixed deposit not reissued bv the banks means a decided loss to them. As the banks' existence depends on their trading. it would be interesting to have an explanation as to how money can become frozen as long as there is a demand, backed by securitj-, for it. Tyro.