BANK DEPOSITS

New Zealand Herald, Volume LXXIII, Issue 22355, 28 February 1936, Page 15

BANK DEPOSITS

Sir, —Space forbids categorical answers being given to the side-issues raised by "F.S.C." and "Accountant." The point at issue is, "Do or do not banks lend their customers' deposits?" To answer this question without arriving at cross-purposes, it has become necessary to define the meaning of the term "bank deposit." A "bank deposit" is a contractually created right to draw coin of the realm from a bank. A bank deposit originates when a customer pays into a bank either coin of the realm or some right to draw coin of the realm from a bank. Much more frequently thai not bank customers deposit rights to draw coin of the realm rather, than coin of the realm itself. Do the banks ever lend their own customers' rights to ! draw coin of the realm P The banks certainly do no such thing. When® an overdraft is granted a new right tf» draw coin of the realm is granted to a new debtor. As soon as the new debtor spends his right to draw the payee becomes a new creditor of the bank. >)o prior rights to draw are ever cancelled to offset the new right. All of this, however, is a mere discussion of the sophistry which is in vogue within a falsely-conceived system. Coin of the realm has virtually ceased to exist; but that fact does not perturb the banks, so long as they can, continue to lend without any legal liability to pay out in terms of coin of the realm. The fundamental question, however, has not been discussed. That question is: Is money-lending or credit-lending a. justifiable monetary practice? The answer to that is that money-lending or credit-lending of any kind, whether at interest or otherwise, whether by a bank, an individual or a Government, is a gross interference with the mathematics of distribution. If we are to have a sound community the practice must be abolished. Wellington. P. B. Fitzhebbebt<