A MUNICIPAL MUDDLE

New Zealand Times, Volume XXXVI, Issue 8263, 28 October 1912, Page 4

A MUNICIPAL MUDDLE

Writes Harry Quelch, editor of London “ Justice ” : “Why on earth municipalities should be compelled to raise loans—on which they have to pay interest to bankers and private capitalists—in order to carry out works of public utility, instead of having the power to carry these out on their own credit, with the security of their ratable value behind them, I have never been able to discover.

“The work is really carried on on credit, in either case. When a municipality raises a loan, say, of a hundred thousand pounds, tho good people who subscribe it, and the bankers who negotiate it, do not plank down a hundred thousand golden sovereigns. As a matter of fact, they haven't got them to plank down. “The paucity of the gold currency offers no difficulty, however; subscribers and bankers simply advance paper counter’s. These represent real money, and, it is assumed, can always be changed into real money at will. “But, after all, they only constitute a form of credit. On such advances of intrinsically worthless paper, the municipality pays interest, while at the same time pledging its credit for the repayment. “ What a silly, roundabout way it all is t As if tho municipality—whose credit* after all, is essential to tho enterprise, and to the payment of the princrpal, plus the interest—could not pledge its credit directly to those who supply the material and the labor, and so save tho interest to banker and financier.”