PROPOSED EXCHANGE BANK.

New Zealand Mail, Issue 1367, 12 May 1898, Page 13

PROPOSED EXCHANGE BANK.

AD. BBSS BY MR M. FLURSCHEIM,

A meeting held in Thomas' Hall on Wednesday week, and attended by some 200 ladies and gentlemen, was addressed by Mr Michael Flurscheim on the proposed New Zealand Mutual Exchange Bank. Sir R)bert Stout, who occupied the said that the last word had not yet been said on any question of social or political reform; and he did not think they had heard the last word on the questions of exchange, banks or currency. He felt sure they would all be grateful to Mr Flurscheim if he could throw any light on such difficult subjects as the three he had named.

Mr Flurscheim, who had an encouraging reception, began by giving an outline of the social problem of the nineteenth century, which he said was entirely different from what formerly went under that name. Misery caused through want, through the inability to provide enough for all, was easily understood, but want in consequence of over-production was a problem of quite a different order. In reality we had no over-production, but under-eonsumption, through want of purchasing power. The lecturer said he could not enter into the land problem on this occasion, but he was convinced that no permanent reform was possible without the restoration of the land to the people. He would say only that the currency J reform vfcfyh m was pftussiog taat eVto- >

ing offered also a powerful instrument for . i the repurchase of the land without burden- < ing the people with any hew charges. ■ He then traced the progress from primi- ; tive barter to the use of metal money, I which, he said, was only improve! barter. [ Barter was facilitated through the adop- j tion of some special commodity as the one j which everybody accepted, i e., the money j commodity. As under our complex system i of production and exchange nothing could ; be done without the means of exchange — j without money—and as the supply of this j money was limited, the wealthy minority could corner it, and could make their own terms when they lent it to the producing and trading community. Even ihen the j trade of the world would have to break j j down if most of it was not done by means j of money representatives, or money promises, in the shape of bank notes, cheques, I bills of exchange, I.O.TT.'s, &c. These i palliatives did their work to a certain degree, so long as credit sustained them, but even then th«y were not accessible to many who could not supply the security demanded by the money controllers. la j times of panic, however, they entirely ; broke down and revealed the depth of the chasm which they had covered for the i time being. It was often asked, Why not i use the paper money without the promise —why not issue a money of account, a token money secured by the guarantee of the State ? This was actually done in some cases. Russia and Austria offered two historical proofs how such a money could serve as the currency of a country for many decades without suffering from so many fluctuations of value as our gold money. We were not to be misled by the fluctuations of the gold prices in such countries; the value of money was not gauged by this one product " gold," but by all products ; and the lecturer maintained that the average prices of commodities and services had varied less in these two paper money countries during the last 30 years than they had in gold currency countries. Not only had the value of gold appreciated 60 per cent, since 1873, but in times of panic there had been temporary appreciations of at least 25 per cent. The lecturer showed this to have been the case by giving variations of prices of different staples during times of financial panic. But, he continued, how about those bugbears, the French assi gnats, Law's paper money, Confederate dollars and greenbacks ? Was there no truth in the quantity theory, which pretended that the value of money depended on the relation of its supply to the demand of trade ? Certainly, but this demand of trade was a very flexible factor, depending among other things on the wealth of the people, on their productive power, and on interest. So long as people could obtain interest for money nobody would keep more money in stock or at his bank than he could help, for fear of losing interest. Interest was also at the bottom of the accumulations of the rich

and of their power of curtailing the purchasing capability of the masses, and therefore of production. It thus limited in a double way the volume of money which could be kept floating without curtailing its value. The first condition of success ot a State bank issuing money of account, token money, therefore was that it held its money at the disposal of the people, free of interest, demanding simply the risk premium and a. commission to pay for expenses. The second condition was that full confidence existed that each note was fully covered by produce or services held ready for it on demand. If these two conditions were complied with, any amount of money could be floated whioh the community wanted for legitimate purposes, for this meant just that a corresponding amount of services and produce was to be had for notes. Notes issued to the producers and traders of the nation in proportion to their productive needs were covered by what was better than gold, by >,h-.- productive poA'or of the community, \i\ unfettering this productive power they were bound to increase the wealth of the community so enormously that thi3 wealth would form the counterpart of an almost unlimited amount of currency. Most of thi.s wealth would find its way into the deposit department of theAew State bank, and from there could be ""used for productive enterprises of the State, such as the building of roads, railroads, canals, &c, without endangering the backing of the notes issued. Foreign demands for gold would be paid by exports as before. The new Exchange Bank which the lecturer wanted to start furnished a practical lesson as to how the future State bank, of whici this Exchange Btnk was to be the pr j cursor, should be organised. Before entering into the details of this organisation the lecturer gave a criticism of the imperfections, of other organisitions of a aimlar nalurr, such as Robert Owen's exchange bank and the American labour exchanges. Instead of warehousing stock like them, the new bank left the goods in the hands of the producer and trader. It engaged them only to deliver goods or services on demand at the usual prices to whoever presented a cheque or note of the bank. These cheques or notes thus formed only the means of account between the parties who wanted to trade with each other. As each such paper procured anything the members wanted, within the circle of members who were to consist of all trades, it performed the services of our present money. They were bank notes issued, not on the faith of one single scarce commodity, but on that of all commodities and services, and everyone could have his note redeemed just in the very service or produce he needed, because production would follow demand, as it now did. The more the people wanted of one special commodity, the more there would be supplied of it, and the less they wanted the more would production shun the special line ttw out of demand. The fact that Owen's and the American labour exchanges had not <f this elasticity, by the Wts nature of thsr ■

organisation, as stores produced inconveniences which more than anything else brought about the fall of the former and might yet endanger the latter. The French exchange bank, "Lo Comptoir du Credit Central," had had a continuous course of success since its organisation, 50 years ago, in 184 S, though it was organised in a more clumsy way than the plan which the! lecturer proposed for the New Zealand Mutual Exchange Bank. Besides, the French bank was a limited company which charged its members from 3 to 5 per cent, commissions, whereas the new bank was to be conducted on the basis of mutuality.

One great effect of the Exchange Bank would be the fostering of native industry, as its notes would not buy foreign goods The bank would be organised under the Industrial and Provident Societies Act, so soon as about 400 members had signified their adherence. Ho asked merely for conditional adherents, i.e., conditional on a sufficiently numerous membership being enrolled, and satisfaction with the rules which were to be submitted to the first organising meeting, which also would elect the board of director?. He hoped that not only the business men but also the workers of New Zealand would join in numbers, because the success of the bank meant also good times for them. Their trade uuions could not procure them I good wages if there was no demand for J labour. The first condition of their sucI cess was a brisk and steady business all round. The banks of New Zealand ought to be the best supporters of the new organisation, because the success of the Exchange Bank and the following organisation of a State bank would alone enable them to liquidate without loss. As things now stood a calamity was unavoidable when the first panic brought things to a pass. The country had only about ,£4,000,000 of cash, and depositors at the banks alone would have to get .£14,000,000, not counting note - holders and other creditors. He repeated that the totaHty of debts exceeded the total ttock of bullion and coin of the world more than thirty-fold. New Zealand was getting behind by over £1,000,000 a year, as outside interest debts were £3,000,000, whereas exports did not now quite reach an excess over imports of £2,000,000, and this excess was the only way with which we could pay our debts. Depressions followed good times, with absolute certainty, and were bound to become worse all the time, because their cause, the accumulations of the rich, increased from year to year. Not one of his hearers was sure of the morrow, their very life interest, The existence of their wives and children was at stake—that of the whole commonwealth. What could be its future when the indebtedness for mortgages, that of the State and of the local bodies alone, amounted to over <£3so for each fauvly, and was rapidly increasing ? The political mill was grinding too slowly 5 self help was the only remedy, and there could be no more powerful or quicker means of self help than the one he offered them. Its effect would be immediate, because the trade of the members of the bank would at once increase with the increased purchasing power which their new medium of exchange gave them. (Warm applause.) In reply to a question, Mr Flurscheim said he thought the bank should deal only with business parsons, producers or traders. It would, however, for reasons which he gave, bo advantageous for labourers to take the bank's notes. Mr F. Robinson asked whether the taking of shares in the bink was a transaction whioh could by any possibility be profitable. Mr Flurscheim replied that the bank would do just what the most cautious trader would do. If a man was good enough for, say, £IOO, he would get credit for .£100 ; if he was not good enough, he would not get credit. The bank would require him to sign a bi 1 of exchange. What it really would do would be to give commercial credit in the shape of bank credit.

It was announced that Mr Flurscheira would answer any questions that might be sent to him by post.

Votes of thanks to the lecturer and the chairman were accorded by aoclamation.