THE BANKING SYSTEM

New Zealand Herald, Volume LXXI, Issue 21844, 5 July 1934, Page 15

THE BANKING SYSTEM

Sir,—Mr. A. C. A. Sexton's letters on the above subject exemplify the adage "a little learning is a dangerous thing." He is, apparently, unaware that bank book-keeping is by double entry and that for every credit there must be a. debit. If the £400,000 was credited at once to the Government account, it must necessarily have been debited to some other account. The explanation of what seems to be such a mystery is that for tho convenience of the Government the bank converted the bonds into currency, the bank's own credit, backed by tangible assets, enabling it to do so. L.S.D. Sir,—Mr. McMillan in his recent letter contends for "First Things First" and points out that fingers were used before forks and land reform should come before currency reform. I stibmit, however, without expressing any opinion on the matter of land reform, that unless we obtain currency reform many of us will have to dispense with forks and rely on our fingers entirely. For, although land reform might prevent land speculation, it will not necessarily ensure that the burden of debt will not bo laid heavily, and more heavily, on the community by those who control tho issue of currency and have power to deflate by withdrawing money from circulation, or inflate by the issue of extra money. F.C.J.