BANK DEPOSITS

New Zealand Herald, Volume LXXIII, Issue 22349, 21 February 1936, Page 15

BANK DEPOSITS

Sir, —Mr. Fitzherbert admits the bank buys Brown's machine on credit and sells it to Adams on credit. He adds, "provided the word 'credit' is used in the sense which implies no real payment has been made." The proviso is mere persiflage since no payment can have been made, otherwise it would not have been a "credit" purchase. We see then that the bank does exactly what a retailer does when he buys and sells ■roods on credit. If the bank then, in the case quoted, "creates credit" so also does the retailer. Moreover, the bank did not take the initiative, Adams did that. Further, the machine transaction falls into this order; first, purchase bv the bank from Brown; second, salo to Adams. And yet Mr. Fitzherbert says the banks do not lend their deposits' The distinction made between "new" and "old" money is quite irrelevant. If all bank transactions wore of the kind indicated, the old money (deposits) was lent at the time the old loans were made. I must compliment your correspondent on his candour in admitting the obvious, but it has been his undoing. It has demonstrated that lie is quite unable to support the theory that banks do not lend their deposits, The question of interest is another matter. I am not a supporter of interest, but why single out the banks? Banks' shareholders, in the aggregate, do not receive a tithe of the interest taken by other capitalists as a class. The remedy for interest lies much deeper than currency, and cannot be effected by the more manipulation of monev counters. Accountant.