BANKS AND INTEREST

New Zealand Herald, Volume LXXIV, Issue 22627, 15 January 1937, Page 13

BANKS AND INTEREST

Sir, —I agree with Mr. Johnstone that bank mone.v costs nothing, and that bank deposits originate in bank loans, and 1 think we could both make a concession to the "skylarks" and admit that the expression "money is created by a stroke of the pen" is merely a metaphorical expression of the above statement. Similarly, my suggestion that financial institutions would find it advantageous to attract deposits and keep them under lock and key was also metaphorical; and surely Mr. Johnstone will agree that the more money that is placed on fixed deposit the less money there is available for private competition in the security market. 1 have never suggested, though, that depositing money diminishes the supply available for lending. The only limit to that is "good security" ottering. Hence we come to this position: (]*) The banking system supplies all money; (2) the system disburses money in salaries, loans, gilts (occasionally), purchases and running costs; (3) the system withdraws money by charges, sales and terminating loans. It, therefore, it is found that the community is eternally and overwhelmingly in debt to the system, it is obvious that either (2) is too small a flow, or (.'}) is too great. What objection has Mr. Johnstone, to the community taking it upon themselves to say to the controllers of the svstem, "You control us by debt. Your'control, instead of being gentle, is oppressive. You have abused your trust. You shall therefore work henceforth under orders. You must cither reduce vour charges, or increase your gifts —or both." Austen Goss.