BANKS’ GOLD
AUSTRALIAN CRITICISM WHAT SOUTH AFRICA DID. Arguments of the New Zealand Government for taking over the gold coin of the banks trading in the Dominion are dealt with by the Australian Banking and Insurance Record, and the conclusion arrived at is that they will not stand examination. The Record greatly regrets that •“ the New Zealand Government should have treated the question of establishing a Central Reserve Bank in such a manner as at once to amount to a piece of injustice and to throw an air of politics over the institution, a thing specially to be avoided in dealing with the subject in question. Injustice is involved in the proposal to take the gold held by the banks In exchange for depreciated paper currency without taking the depreciation into account. “ The Government has put forward lengthy arguments, which, however, will not stand examination. If the arguments of the Government were valid they: would lead to much wider conclusions than those represented by the present proposal. One feature of the position is that the gold held by some of the banks exceeds their note issues. Part of the gold held has been imported by banks into New Zealand, and here again the inequitable character of the proposal is evident. The total amount now held by the banks is substantially greater than one-third of the note issue, while the security of the existing note issues is based not simply on the gold held, but also upon the first charge over all assets. “ SAVOURING OF SPOLIATION.” “ With regard to one aspect of the matter,” the Record continues, “it is to be noted that present circumstances in New Zealand are different from those in Australia, when the banks provided the Government with gold for export to meet a pressing situation. The New Zealand Government has larger funds in London, and there is consequently no comparison between the two cases. Disinterested banking opinion is opposed to the proposal, which is regarded as being unfair and inequitable, and savouring of spoliation. Altogether there is no reason why the banks should not be treated fairly, and it is to be hoped that further consideration will lead to a different result from that proposed.” The Sydney Bulletin also refers to thje same subject, describing New Zealand as “ rent asunder ” over the decision of the Government to take over “ all the gold coin in the hands of the private banks—-about 4,400,000 sovereigns—at mint par value, £4 5s per fine ounce.” The journal, after quoting Sir Francis Bell’s opinion that the gold is the banks’ property, also quotes the Finance Minister’s argument that the gold is held purely as a statutory reserve against note issue, and that the banks retain it- only, because the Government years ago absolved them from the liability of redeeming their nbtes in gold.”
“BOOSTED EXCHANGE.” The Bulletin continues: “The banks retort that their statutory gold reserve against note issue is 33 1-3 per cent., whereas their gold holdings are little short of 100 per cent, of notes issued, and in the case of four of the six banks actually exceed note issue. More outspoken critics say that the Government aims at staving off the return to roost of the chickens of boosted exchange. “ The Reserve Bank’s note issue need have a backing of only 25 per cent, sterling exchange, and if it commandeers 'he private banks’ gold at mint par and exercises to the full its right to take up outstanding Treasury bills, over £20,000,000 will be made available to the Treasury to tide over present financial troubles.”
The report of the thirteenth ordinary general meeting of the South African Reserve Bank for 1933, after reviewing the events which caused South Africa to go off gold and cease quoting exchange, refers to what was done to establish parity with sterling. Large amounts were brought back to South Africa as the result of the Reserve Bank’s, prompt action, and in addition a considerable amount of new capital was introduced, principally for the purchase of goldmining shares. The commercial banks had to buy the sterling offered, which was far in excess of their ordinary requirements, .and as under the circumstances they preferred to maintain a balanced position, they sold their, excess holdings of sterling to the Reserve Bank, who in turn invested by far the larger portion of the funds thus acquired in London in British Treasury bills. The sums paid in South African pounds by the Reserve Bank for this sterling went to the credit of the commercial banks in its books. It is noted in the report that “ consequent upon the Union leaving the gold standard the gold coins in circulation increased in value as against the paper pound. “ The Government decided that holders of gold coin should be free either to export it. or sell it locally at its appreciated value. By March 31 last, about £1,000,000. gold coin and £400,000 _ silver coin had been withdrawn from circulation and replaced by bank notes.”
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Bibliographic details
Otago Daily Times, Issue 22137, 15 December 1933, Page 17
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831BANKS’ GOLD Otago Daily Times, Issue 22137, 15 December 1933, Page 17
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