THE RESERVE BANK PROPOSAL

Otago Daily Times, Issue 22066, 23 September 1933, Page 9

THE RESERVE BANK PROPOSAL

TO THE EDITOB. Sir, —I have read with interest the articles on the Reserve Bank proposal by the Minister of Finance. After the most careful perusal of them I must say they are purely and simply an exposition of the powers and functions of a Central Reserve Bank, with no cogent reasons why the system should be applied to New Zealand. To compare the application of the reserve bank system to New Zealand with supplying a throttle and brakes to a car shows a complete absence of study and understanding, for the simple reason that a car, large or small, cannot function without throttle and brakes, whereas our banking system has been functioning quite as efficiently as any other system ever since I can remember. The chief trouble is that our banking car is a hired one, and it is about time we owned our own. A better analogy is the electric tram system, which is a good thing applied to a large centre like Dunedin, whereas to try to run a 2d tram in a small country town would he absurd. In the same way in a small place like New Zealand, where the banks seem to work harmoniously together, and where one large bank could just about do all the banking business, the expense that will be involved in the maintenance of a Reserve Bank is unwarranted. As far SB we in New Zealand are able to judge, no countries that have a Reserve Bank are getting through the depression any better than we are. Mr Coates is singularly unfortunate in quoting the Economic Conference as an authority for recommending the establishment of a Reserve Bank, inasmuch as the conference was a complete failure in the matter of improving the financial position of the world. Now, if this idea of central banking is followed to its logical conclusion, the next step must be an international Reserve Bank. This has already been suggested. We have, during the last few years, witnessed a selfish and unseemly scramble for gold, America in particular apparently trying to corner the gold supply of the world—that is, the international

currency—and thereby control world finance. 'The attempt failed. Now, u there should be a chain of reserve banks, with every nation having a-proportion of its reserves in the international Reserve Bank, it stands to reason that in time the strongest financial power must control the Reserve Bank and thereby the finance of the world. Finally, Mr Contes, with his usual inconsistency, after using political pressure to make the banka act in accordance with th e wishes of the Goveminent, brings in all sorts of rules and regulations to make sure that the Reserve Bank will not, and must not, be subject to political influence or control. I wish to draw the attention of the public to the fact that talk of political control is a bogey which we have no need to fear. It does not matter what the Act says; when the time comes that the Government desires to interfere away will go the regulations. And so it should be. The Government is the people, and the people get the Government they deserve, and if we are afraid of the men we send to Parliament why have a Parliament? What is the good of democratic government? It was Government interference which saved the Bank of New Zealand, and the Government was not Coalition or Conservative, but what was known in those days as Radical. We must not, however, bring in any side issues; never mind the type of Government. The mam point is that the representatives of the people must and always will have the final say. I would like to say that all our financial troubles are due to three fundamental faults: First, the chief, in fact, almost the only, method of getting money into circulation is by borrowing; secondly, a false conception of the value of gold and the use of the gold standard; and, thirdly, misunderstanding of the term " exportable surplus” and the use thereof. —I am, etc., Ratanui, September 20. J. J. Hale.